Enact delivered a strong finish to 2025, reporting Q4 adjusted operating income of $179 million ($1.23 per share) and an adjusted ROE of 13.5%. For the full year, the company generated $688 million in adjusted operating income ($4.61 per share), with adjusted book value per share growing 11% to $37.87. Performance was driven by robust new insurance written of $14 billion (up 8% year-over-year) and a $60 million net reserve release resulting from improved credit performance and a reduced claim rate to 8%. The company returned a record $503 million to shareholders in 2025 and announced 2026 capital return expectations of approximately $500 million, supported by a new $500 million share repurchase authorization. Management remains confident in navigating macro uncertainty through disciplined risk selection, dynamic pricing via its Rate360 engine, and a strong capital position (PMIERs sufficiency of 162%).
| Metric | Value | Change |
|---|---|---|
| Adjusted Operating Income (Q4) | $179 million | N/A |
| Adjusted EPS (Q4) | $1.23 | +13% YoY |
| Adjusted Operating Income (FY) | $688 million | -4% YoY |
| Adjusted ROE (Q4) | 13.5% | N/A |
| New Insurance Written (Q4) | $14 billion | +8% YoY |
| Insurance In-Force | $273 billion | +1% YoY |
| Persistency | 80% | -3 pts QoQ |
| Loss Ratio | 7% | -8 pts QoQ |
| Delinquency Rate | 2.6% | +10 bps QoQ |
| Book Value Per Share | $37.87 | +11% YoY |
Enact is prioritizing aggressive capital return to shareholders, having returned over $500 million in 2025 and setting a $500 million target for 2026. This is supported by a new $500 million share repurchase authorization, the largest in the company's history. Management emphasized that this strategy is underpinned by a robust capital position, evidenced by a PMIERs sufficiency ratio of 162% (nearly $1.9 billion above requirements). This signals a shift towards a more shareholder-friendly capital deployment policy while maintaining financial flexibility.
The company is leveraging advanced technology, specifically its Rate360 pricing engine, to maintain underwriting discipline in a volatile market. Management highlighted that this dynamic, risk-adjusted pricing tool allows them to adapt to evolving market conditions and 'prudently price risk.' This technological capability is a key strategic differentiator, allowing Enact to protect margins and risk-adjusted returns even as credit profiles in the purchase market shift towards higher LTVs and DTIs.
Enact is successfully executing its Credit Risk Transfer (CRT) program to optimize capital efficiency. The company secured coverage on the 2026 and 2027 books at attractive costs, moving to the 'lower end' of the low-to-mid single-digit cost of capital range. This strategic use of reinsurance reduces volatility and frees up capital, supporting their high ROE targets and shareholder return objectives.
Management is focusing on expense discipline to drive operating leverage. Despite inflationary pressures, operating expenses for 2025 were $217 million (excluding restructuring), beating guidance of $219 million. For 2026, guidance is flat at $215-$220 million. This indicates that investments in technology and innovation are driving productivity gains, allowing the company to grow revenue without a corresponding increase in expenses, which should support margin expansion.
Persistency declined to 80% in Q4, down 3 points sequentially and 2 points year-over-year. Management attributes this to declining mortgage rates incentivizing refinancing. While they note that 59% of loans in the book have rates below 6% (supporting future persistency), a sustained drop in persistency could pressure insurance in-force growth and premium revenue if refinance activity accelerates beyond expectations.
Credit metrics showed signs of deterioration, albeit within management's expectations. Total delinquencies increased to 24,900 (2.6% delinquency rate), and new delinquencies rose to 13,700 (1.5% rate). While management frames this as seasonal and consistent with 'pre-pandemic levels,' the sequential increase of 10 basis points in the delinquency rate and the aging of the book (average age 4.1 years) suggest credit normalization could lead to higher loss provisions in future quarters.
Geographic concentration risks are emerging in the Sunbelt region. Management explicitly noted housing price moderation or declines in 'parts of the Sunbelt, particularly kind of Florida, Texas, California, Arizona.' If these markets experience further corrections, the collateral value backing the insurance book in these regions could be negatively impacted, potentially leading to higher severity on defaults.
Regulatory and policy uncertainty presents a tangible risk to the business model. Management acknowledged active engagement with the new administration regarding housing affordability and potential GSE/FHA changes. While they are providing input, shifts in policy regarding credit scoring or GSE roles could alter the competitive landscape or demand dynamics for private mortgage insurance.
Overall: Management conveyed a tone of disciplined confidence and operational control throughout the call. Executives were transparent about macro headwinds and seasonal credit trends but consistently emphasized the company's ability to navigate these challenges through proactive risk management and capital strength. The demeanor shifted from factual reporting in prepared remarks to engaging and detailed defense of their strategy during the Q&A.
Confidence: HIGH - Management provided specific quantitative guidance for 2026, detailed historical performance metrics, and articulated a clear capital allocation strategy. Their use of definitive language regarding their 'disciplined execution' and 'strong balance sheet' underpins a high level of confidence.
Approximately $500 million
$215 million to $220 million (excluding reorganization costs)
Relatively flat versus 2025
Approximately 10% to 15% increase
Hedging & Uncertainty: Management utilized hedging language primarily regarding macroeconomic forecasts and regulatory outcomes, using phrases like 'uncertain macro environment,' 'dynamic,' and 'tough to forecast.' However, they reduced hedging significantly when discussing internal operational capabilities, using definitive terms like 'confident,' 'discipline,' and 'commitment.' For example, Hardin Mitchell stated, 'It's tough to forecast originations... But with that being said... we can see an increase of approximately 10% to 15%.' This pattern suggests management is confident in their execution and risk controls but acknowledges the unpredictability of external market forces.
We're confident that right now, given those dynamics, we're confident in our ability to return $500 million to shareholders in 2026. - Hardin Mitchell, CFO and Treasurer
We haven't seen performance differ from our pricing expectations that we established at policy inception. - Hardin Mitchell, CFO and Treasurer
Enact delivered a very strong finish to 2025 that reflected the disciplined execution of our strategy. - Rohit Gupta, President and CEO
We continue to make steady progress against our strategic initiatives, advancing innovation in the MI business. - Rohit Gupta, President and CEO
We remain actively engaged with the new administration... on the topics that are in discussions. - Rohit Gupta, President and CEO
Analyst Sentiment: Analysts were generally inquisitive and focused on the sustainability of capital returns, credit quality normalization, and the regulatory landscape. Questions from firms like UBS, Bank of America, and JPMorgan probed for details on sensitivities to guidance and specific risk factors in the loan book.
Management Responses: Management responses were detailed and data-driven, often referencing specific metrics like vintage performance, geographic exposure, and delinquency trends to support their narrative. They effectively defended their credit performance against concerns about the 'front book' and maintained a firm stance on their ability to meet capital return targets.
Analysts pressed for details on the sensitivity of the $500 million capital return guidance, asking what factors could cause a deviation. Management clarified that while confident, returns depend on business performance, macroeconomics, and regulatory changes.
Discussion regarding the 'front book' (post-2022 vintages) versus the 'legacy book,' with analysts asking if credit performance was meeting expectations. Management confirmed that recent vintages are performing in line with pricing expectations despite higher risk attributes.
Inquiries into the regulatory environment, specifically potential FHA rate cuts and GSE policy changes. Management stated they are actively engaged in discussions but noted no specific, imminent execution risks that would drastically alter the thesis.
Questions about expense management and the potential for further expense ratio declines. Management highlighted technology investments as a driver for efficiency but refrained from giving long-term specific ratio targets beyond 2026.
Enact presents a compelling investment case driven by its disciplined capital allocation strategy and robust underwriting profitability. The company's 13.5% ROE and 11% book value growth demonstrate high-quality earnings generation. The commitment to returning $500 million annually, coupled with a new buyback authorization, signals significant shareholder friendliness. While credit normalization and persistency headwinds are minor concerns, Enact's strong capital position (162% PMIERs) and dynamic pricing capabilities (Rate360) provide a resilient moat. The valuation appears supported by the company's ability to generate excess capital and maintain strict expense discipline, making it an attractive holding in the financial sector.
Management forecasts a 10-15% increase in the mortgage insurance market for 2026, driven by purchase originations, despite affordability challenges. Demographic tailwinds from first-time homebuyers are cited as a long-term support.
Mortgage rate volatility is viewed as a constraint on forecasting, but recent declines have spurred refinance activity, impacting persistency. Management expects rates to remain a key driver of housing affordability.
Potential policy changes regarding GSEs, FHA, and housing affordability (e.g., credit score models, institutional investor purchases) are being monitored closely. Management is actively engaging with policymakers but acknowledges the uncertainty of these discussions.
Specific weakness noted in Sunbelt markets (Florida, Texas, Arizona, California) due to increased housing supply and price moderation, contrasting with the Northeast where supply remains low and prices are appreciating.