[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements with inherent risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements regarding expected financial and operational results, which involve risks and uncertainties that could cause actual results to differ materially[6](index=6&type=chunk) - Key risk factors include inability to maintain PMIERs, deteriorating economic conditions, uncertainty around COVID-19, loss reserve estimate inaccuracies, competition, changes to GSE charters, interest rate fluctuations, limited capital/reinsurance, adverse rating agency actions, and various operational and regulatory risks[7](index=7&type=chunk)[8](index=8&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, equity changes, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | |:---|:---|:---| | **Assets** ||| | Total investments | $4,925,888 | $4,887,807 | | Cash and cash equivalents | $691,416 | $513,775 | | Total assets | $5,923,860 | $5,709,149 | | **Liabilities** ||| | Loss reserves | $490,203 | $519,008 | | Unearned premiums | $174,561 | $202,717 | | Total liabilities | $1,547,964 | $1,608,241 | | **Equity** ||| | Total equity | $4,375,896 | $4,100,908 | | Total liabilities and equity | $5,923,860 | $5,709,149 | - Total assets increased by **$214.7 million** from December 31, 2022, to June 30, 2023, primarily driven by an increase in cash and cash equivalents[12](index=12&type=chunk) - Total liabilities decreased by **$60.3 million**, mainly due to a reduction in loss reserves and unearned premiums[12](index=12&type=chunk) - Total equity increased by **$274.9 million**, reflecting improved financial health[12](index=12&type=chunk) [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Details the company's revenues, losses, expenses, and net income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Income (Amounts in thousands, except per share amounts) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| **Revenues** ||||| | Premiums | $238,520 | $237,386 | $473,628 | $471,665 | | Net investment income | $50,915 | $35,776 | $96,256 | $70,922 | | Net investment gains (losses) | $(13,001) | $(381) | $(13,123) | $(720) | | Total revenues | $277,522 | $273,541 | $558,461 | $543,129 | | **Losses and expenses** ||||| | Losses incurred | $(4,070) | $(61,563) | $(15,054) | $(72,009) | | Acquisition and operating expenses, net of deferrals | $51,887 | $58,201 | $103,592 | $112,463 | | Total losses and expenses | $63,375 | $12,654 | $119,801 | $72,336 | | Income before income taxes | $214,147 | $260,887 | $438,660 | $470,793 | | Provision for income taxes | $46,127 | $56,152 | $94,652 | $101,428 | | Net income | $168,020 | $204,735 | $344,008 | $369,365 | | **Net income per common share** ||||| | Basic | $1.04 | $1.26 | $2.13 | $2.27 | | Diluted | $1.04 | $1.25 | $2.11 | $2.26 | - Net income decreased by **18%** for the three months ended June 30, 2023, and by **7%** for the six months ended June 30, 2023, compared to the respective prior year periods[14](index=14&type=chunk) - Net investment income significantly increased by **42%** for the three months and **36%** for the six months ended June 30, 2023, driven by higher yields and average invested assets[14](index=14&type=chunk)[178](index=178&type=chunk)[186](index=186&type=chunk) - Losses incurred showed a favorable change, decreasing from **$(61,563) thousand** to **$(4,070) thousand** for the three months, and from **$(72,009) thousand** to **$(15,054) thousand** for the six months, primarily due to significant reserve releases on prior year delinquencies[14](index=14&type=chunk)[179](index=179&type=chunk)[187](index=187&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Reports net income and other comprehensive income components, showing total comprehensive income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Comprehensive Income (Amounts in thousands) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Net income | $168,020 | $204,735 | $344,008 | $369,365 | | Other comprehensive income (loss), net of taxes: ||||| | Net unrealized gains (losses) on securities without an allowance for credit losses | $(25,000) | $(152,401) | $37,510 | $(376,701) | | Foreign currency translation | $(1) | $64 | $(9) | $93 | | Other comprehensive income (loss) | $(25,001) | $(152,337) | $37,501 | $(376,608) | | Total comprehensive income (loss) | $143,019 | $52,398 | $381,509 | $(7,243) | - Total comprehensive income significantly increased to **$143.0 million** for the three months and **$381.5 million** for the six months ended June 30, 2023, compared to **$52.4 million** and **$(7.2) million** in the prior year periods, primarily due to a positive change in net unrealized gains on securities[17](index=17&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Outlines changes in common stock, paid-in capital, accumulated other comprehensive income, and retained earnings for the periods ended June 30, 2023 Condensed Consolidated Statements of Changes in Equity (Amounts in thousands) - Three Months Ended June 30, 2023 | Metric | Common stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings | Total equity | |:---|:---|:---|:---|:---|:---|\n| Balance as of March 31, 2023 | $1,619 | $2,362,281 | $(320,242) | $2,252,963 | $4,296,621 | | Net income | — | — | — | $168,020 | $168,020 | | Other comprehensive income (loss), net of taxes | — | — | $(25,001) | — | $(25,001) | | Repurchase of common stock | $(17) | $(41,218) | — | — | $(41,235) | | Stock-based compensation expense and exercises and other | — | $3,464 | — | $(271) | $3,193 | | Dividends | — | — | — | $(25,702) | $(25,702) | | Balance as of June 30, 2023 | $1,602 | $2,324,527 | $(345,243) | $2,395,010 | $4,375,896 | Condensed Consolidated Statements of Changes in Equity (Amounts in thousands) - Six Months Ended June 30, 2023 | Metric | Common stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings | Total equity | |:---|:---|:---|:---|:---|:---|\n| Balance as of December 31, 2022 | $1,628 | $2,382,068 | $(382,744) | $2,099,956 | $4,100,908 | | Net income | — | — | — | $344,008 | $344,008 | | Other comprehensive income (loss), net of taxes | — | — | $37,501 | — | $37,501 | | Repurchase of common stock | $(27) | $(63,408) | — | — | $(63,435) | | Stock-based compensation expense and exercises and other | $1 | $5,867 | — | $(496) | $5,372 | | Dividends | — | — | — | $(48,458) | $(48,458) | | Balance as of June 30, 2023 | $1,602 | $2,324,527 | $(345,243) | $2,395,010 | $4,375,896 | - Total equity increased from **$4,100,908 thousand** at December 31, 2022, to **$4,375,896 thousand** at June 30, 2023, primarily driven by net income and positive other comprehensive income, partially offset by share repurchases and dividends[23](index=23&type=chunk) - The company repurchased **$63.4 million** of common stock and paid **$48.5 million** in dividends during the six months ended June 30, 2023[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|\n| Net cash provided by operating activities | $287,185 | $301,745 | | Net cash provided by (used in) investing activities | $2,349 | $(120,828) | | Net cash used in financing activities | $(111,893) | $(22,798) | | Net increase in cash and cash equivalents | $177,641 | $158,119 | | Cash and cash equivalents at end of period | $691,416 | $583,947 | - Net cash provided by operating activities decreased slightly to **$287.2 million** for the six months ended June 30, 2023, from **$301.7 million** in the prior year, mainly due to timing of tax payments and reduction in unearned premiums[27](index=27&type=chunk)[267](index=267&type=chunk) - Investing activities shifted from a net cash outflow of **$120.8 million** in 2022 to a net cash inflow of **$2.3 million** in 2023, as maturities and sales of securities outpaced purchases[27](index=27&type=chunk)[268](index=268&type=chunk) - Net cash used in financing activities significantly increased to **$111.9 million**, driven by **$63.4 million** in share repurchases and **$48.5 million** in dividends paid[27](index=27&type=chunk)[268](index=268&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of the accounting policies, significant transactions, and financial position supporting the condensed consolidated financial statements [(1) Nature of business, organization structure and basis of presentation](index=12&type=section&id=(1)%20Nature%20of%20business%2C%20organization%20structure%20and%20basis%20of%20presentation) Describes Enact Holdings, Inc.'s business as a residential mortgage guaranty insurer, its IPO, and operations through EMICO and Enact Re Ltd - Enact Holdings, Inc. (EHI) is a subsidiary of Genworth Financial, Inc. and completed a minority IPO of **18.4%** of its common stock in September 2021[29](index=29&type=chunk) - The company primarily writes and assumes residential mortgage guaranty insurance, enabling borrowers to buy homes with low down payments and facilitating secondary mortgage market sales to GSEs[30](index=30&type=chunk) - Operations are conducted through Enact Mortgage Insurance Corporation (EMICO) in all 50 states and D.C., and mortgage-related insurance/reinsurance through Bermuda-based Enact Re Ltd., to which **$250 million** was contributed in Q2 2023[31](index=31&type=chunk) [(2) Accounting changes](index=13&type=section&id=(2)%20Accounting%20changes) Confirms no new accounting pronouncements adopted in 2023 and no significant unadopted pronouncements impacting financial statements - The company has not adopted new accounting pronouncements in 2023, and there are no significant new pronouncements impacting its financial statements that are not yet adopted[35](index=35&type=chunk) [(3) Investments](index=13&type=section&id=(3)%20Investments) Details the company's investment portfolio, including net investment income, gains/losses, and fair value of fixed maturity securities Net Investment Income (Amounts in thousands) | Source | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Fixed maturity securities available-for-sale | $44,542 | $36,810 | $85,917 | $73,344 | | Cash, cash equivalents and short-term investments | $7,955 | $422 | $13,575 | $432 | | Net investment income | $50,915 | $35,776 | $96,256 | $70,922 | Net Investment Gains (Losses) (Amounts in thousands) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Net realized gains (losses) on fixed maturity securities | $(12,988) | $(381) | $(13,110) | $(893) | | Net investment gains (losses) | $(13,001) | $(381) | $(13,123) | $(720) | - Net investment income increased significantly due to higher yields from rising interest rates and higher average invested assets[37](index=37&type=chunk)[178](index=178&type=chunk)[186](index=186&type=chunk) - Net investment losses were primarily driven by the sale of fixed income securities as part of an investment strategy to optimize portfolio yield[39](index=39&type=chunk)[178](index=178&type=chunk)[186](index=186&type=chunk) Fixed Maturity Securities Available-For-Sale (Amounts in thousands) | Investment Type | Amortized cost (June 30, 2023) | Fair value (June 30, 2023) | Amortized cost (December 31, 2022) | Fair value (December 31, 2022) | |:---|:---|:---|:---|:---|\n| U.S. government, agencies and GSEs | $112,190 | $110,538 | $46,319 | $44,769 | | State and political subdivisions | $510,288 | $426,528 | $515,935 | $419,856 | | U.S. corporate | $2,728,245 | $2,509,479 | $2,886,269 | $2,646,863 | | Other asset-backed | $1,285,333 | $1,207,764 | $1,185,048 | $1,100,036 | | Total fixed maturity securities available-for-sale | $5,354,262 | $4,915,039 | $5,371,673 | $4,884,760 | - As of June 30, 2023, the total fair value of fixed maturity securities available-for-sale was **$4.915 billion**, with U.S. corporate securities representing the largest portion at **$2.509 billion**[47](index=47&type=chunk) - The company holds significant unrealized losses on fixed maturity securities, primarily due to changes in interest rates and market volatility, but expects to recover amortized cost and does not intend to sell prior to recovery[43](index=43&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) [(4) Fair value](index=18&type=section&id=(4)%20Fair%20value) Explains the methodologies for fair value measurements of assets and liabilities, primarily using third-party pricing services and internal models - Fair value measurements for fixed maturity securities and short-term investments are primarily estimated using third-party pricing services, internal models, and broker quotes, employing market or income approaches[62](index=62&type=chunk) - Approximately **89%** of the portfolio was priced using third-party pricing services as of June 30, 2023, typically classified as Level 2[68](index=68&type=chunk) Assets Measured at Fair Value on a Recurring Basis (Amounts in thousands) | Asset Class | Total (June 30, 2023) | Level 1 (June 30, 2023) | Level 2 (June 30, 2023) | Level 3 (June 30, 2023) | |:---|:---|:---|:---|:---|\n| Fixed maturity securities | $4,915,039 | — | $4,609,062 | $305,977 | | Short-term investments | $10,849 | — | $10,849 | — | | Total | $4,925,888 | — | $4,619,911 | $305,977 | - Level 3 fixed maturity securities, valued using significant unobservable inputs, totaled **$305.9 million** as of June 30, 2023, an increase from **$319.2 million** at December 31, 2022[80](index=80&type=chunk)[81](index=81&type=chunk) Liabilities Not Required to be Carried at Fair Value (Amounts in thousands) | Liability | Carrying amount (June 30, 2023) | Fair value (June 30, 2023) | Carrying amount (December 31, 2022) | Fair value (December 31, 2022) | |:---|:---|:---|:---|:---|\n| Long-term borrowings | $744,100 | $737,790 | $742,830 | $739,020 | [(5) Loss reserves](index=26&type=section&id=(5)%20Loss%20reserves) Provides details on the company's loss reserves, including changes in liability and favorable adjustments from prior accident years Activity for the Liability for Loss Reserves (Amounts in thousands) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|\n| Loss reserves, beginning balance | $519,008 | $641,325 | | Net loss reserves, beginning balance | $518,330 | $640,644 | | Total incurred | $(15,191) | $(71,996) | | Total paid | $(14,048) | $(10,427) | | Net loss reserves, ending balance | $489,091 | $558,221 | | Loss reserves, ending balance | $490,203 | $558,894 | - Loss reserves decreased from **$519.0 million** at the beginning of 2023 to **$490.2 million** at June 30, 2023, primarily due to favorable adjustments on prior accident year reserves[96](index=96&type=chunk) - The company recorded favorable adjustments of **$133 million** on prior accident year reserves for the six months ended June 30, 2023, driven by better-than-expected cure performance of delinquencies from 2021 and earlier, including COVID-19 related ones[100](index=100&type=chunk) - Losses and LAE incurred for the current accident year increased to **$120.2 million** for the six months ended June 30, 2023, from **$75.6 million** in the prior year, attributable to new delinquencies[99](index=99&type=chunk)[189](index=189&type=chunk) [(6) Reinsurance](index=27&type=section&id=(6)%20Reinsurance) Describes the company's reinsurance activities, including policy risk reduction, exposure diversification, and specific reinsurance agreements - The company reinsures a portion of its policy risks to reduce ultimate losses, diversify exposures, and comply with regulatory requirements, while also assuming certain policy risks[101](index=101&type=chunk) Effects of Reinsurance on Premiums Written and Earned (Amounts in thousands) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Net premiums written | $224,401 | $225,756 | $445,472 | $450,127 | | Net premiums earned | $238,520 | $237,386 | $473,628 | $471,665 | - In March 2023, the company executed an excess-of-loss reinsurance transaction providing up to **$180 million** coverage for the 2023 book year[108](index=108&type=chunk) - On June 30, 2023, EMICO entered into a quota share reinsurance agreement, ceding **13.125%** of eligible NIW from January 1, 2023, to December 31, 2023, with a **20%** ceding commission and up to **55%** profit commission[109](index=109&type=chunk)[111](index=111&type=chunk) [(7) Borrowings](index=29&type=section&id=(7)%20Borrowings) Details the company's long-term debt, including senior notes and an undrawn revolving credit facility, and compliance with covenants Long-term Borrowings (Amounts in thousands) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\n| 6.5% Senior Notes, due 2025 | $750,000 | $750,000 | | Deferred borrowing charges | $(5,900) | $(7,170) | | Total | $744,100 | $742,830 | - The company has **$750 million** aggregate principal amount of **6.5%** senior notes due in 2025[112](index=112&type=chunk) - A five-year, unsecured revolving credit facility of **$200 million** (with an uncommitted ability to increase by **$100 million**) was entered into on June 30, 2022, and remained undrawn as of June 30, 2023[114](index=114&type=chunk)[115](index=115&type=chunk) - The company is in compliance with all covenants of the revolving credit facility, which include financial covenants related to net worth, capital, liquidity, debt-to-capitalization, and PMIERs compliance[115](index=115&type=chunk) [(8) Income taxes](index=29&type=section&id=(8)%20Income%20taxes) Explains the computation of income tax provision using a separate return method and consistency with the U.S. corporate federal income tax rate - The provision for income taxes is computed using a separate return with benefits-for-loss method, and the effective tax rate was consistent with the U.S. corporate federal income tax rate[116](index=116&type=chunk)[182](index=182&type=chunk)[191](index=191&type=chunk) [(9) Related party transactions](index=29&type=section&id=(9)%20Related%20party%20transactions) Outlines agreements and costs incurred for services exchanged with Genworth, a related party - The company has various agreements with Genworth for administrative, operating, and investment management services[117](index=117&type=chunk)[119](index=119&type=chunk) Costs Incurred for Services from Genworth (Amounts in millions) | Service Type | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Administrative and operating expenses | $4.5 | $7.5 | $9.2 | $15.3 | | Investment expenses | $1.7 | $1.4 | $3.3 | $2.8 | - The company charged Genworth **$0.1 million** and **$0.2 million** for IT and administrative services for the three months ended June 30, 2023 and 2022, respectively[120](index=120&type=chunk) [(10) Net income per common share](index=30&type=section&id=(10)%20Net%20income%20per%20common%20share) Presents basic and diluted net income per common share, along with weighted average shares outstanding, for the reported periods Net Income Per Common Share (Amounts in thousands, except per share amounts) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Net income available to EHI common stockholders | $168,020 | $204,735 | $344,008 | $369,365 | | Basic EPS | $1.04 | $1.26 | $2.13 | $2.27 | | Diluted EPS | $1.04 | $1.25 | $2.11 | $2.26 | | Basic weighted average common shares outstanding | 161,318 | 162,842 | 161,880 | 162,842 | | Diluted weighted average common shares outstanding | 162,171 | 163,225 | 162,675 | 163,140 | - Basic EPS decreased to **$1.04** for Q2 2023 from **$1.26** for Q2 2022, and to **$2.13** for the six months from **$2.27** in the prior year, reflecting the decrease in net income[125](index=125&type=chunk) [(11) Changes in accumulated other comprehensive income](index=31&type=section&id=(11)%20Changes%20in%20accumulated%20other%20comprehensive%20income) Details the roll forward of accumulated other comprehensive income, highlighting changes from unrealized gains/losses on investments and foreign currency translation Roll Forward of Accumulated Other Comprehensive Income (Amounts in thousands) - Six Months Ended June 30, 2023 | Metric | Net unrealized gains (losses) investment | Foreign currency translation | Total | |:---|:---|:---|:---|\n| Balance as of January 1, 2023, net of tax | $(382,896) | $152 | $(382,744) | | Other comprehensive income (loss) before reclassifications | $27,153 | $(9) | $27,144 | | Amounts reclassified from other comprehensive income (loss) | $10,357 | — | $10,357 | | Total other comprehensive income (loss) | $37,510 | $(9) | $37,501 | | Balance as of June 30, 2023, net of tax | $(345,386) | $143 | $(345,243) | - Accumulated other comprehensive income (loss) improved from **$(382.7) million** at January 1, 2023, to **$(345.2) million** at June 30, 2023, primarily due to positive unrealized gains on investments[131](index=131&type=chunk) [(12) Stockholders' equity](index=32&type=section&id=(12)%20Stockholders'%20equity) Discusses changes in stockholders' equity, including share repurchase programs and dividend payments - The Board approved a **$75 million** share repurchase program on November 1, 2022. During Q2 2023, the company purchased **1,705,169 shares** for **$41.2 million** at an average price of **$24.13**[134](index=134&type=chunk) - For the six months ended June 30, 2023, **2,621,945 shares** were purchased for **$63.4 million** at an average price of **$24.15**, with **$10.1 million** remaining under the program[135](index=135&type=chunk) - A quarterly cash dividend of **$0.16 per share** was paid in Q2 2023, an increase from **$0.14 per share** in Q1 2023 and Q2 2022[136](index=136&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and results of operations, covering key factors, trends, metrics, and capital management strategies [Key Factors Affecting Our Results](index=34&type=section&id=Key%20Factors%20Affecting%20Our%20Results) Notes no material changes to key factors affecting results compared to the Annual Report, except for impacts discussed in 'Trends and Conditions' - No material changes to key factors affecting results compared to the Annual Report, other than impacts discussed in 'Trends and Conditions'[140](index=140&type=chunk) [Trends and Conditions](index=34&type=section&id=Trends%20and%20Conditions) Discusses macroeconomic conditions, mortgage market trends, delinquency rates, insurance in-force, loss ratio, capital adequacy, credit ratings, and shareholder return initiatives - The U.S. economy faced uncertainty in Q2 2023 due to inflation, geopolitical environment, banking failures, and recession fears, with the Federal Reserve continuing interest rate hikes[141](index=141&type=chunk) - Mortgage origination activity remained slow due to elevated mortgage rates and low housing supply, impacting housing affordability despite rising home prices[142](index=142&type=chunk) - Total delinquencies decreased in Q2 2023 as cures outpaced new delinquencies, with the new delinquency rate at **1.0%**. Approximately **1.3%** of active primary policies were in forbearance, with **31%** reported as delinquent[145](index=145&type=chunk) - New insurance written (NIW) decreased by **14%** in Q2 2023 compared to Q2 2022, primarily due to lower originations driven by elevated mortgage rates[155](index=155&type=chunk) - Primary persistency rate increased to **84%** in Q2 2023 from **80%** in Q2 2022, offsetting the decline in NIW and leading to a **$9.6 billion** increase in primary insurance in-force (IIF) since December 31, 2022[155](index=155&type=chunk) - The loss ratio for Q2 2023 was **(2)%**, compared to **(26)%** in Q2 2022, both impacted by favorable reserve adjustments from better-than-expected cure performance on prior year delinquencies[157](index=157&type=chunk)[159](index=159&type=chunk) - EMICO's risk-to-capital ratio was approximately **11.9:1** as of June 30, 2023, well below the NCDOI's maximum of **25:1**[163](index=163&type=chunk) - The company is no longer subject to GSE Restrictions and Conditions as of December 31, 2022, and PMIERs sufficiency was **162%** (**$1,958 million** above requirements) as of June 30, 2023[164](index=164&type=chunk)[166](index=166&type=chunk) - Credit ratings for EMICO were upgraded by S&P, Moody's, and Fitch in early 2023, and A.M. Best initiated A- ratings for EMICO and Enact Re in August 2023[168](index=168&type=chunk) - The quarterly dividend was increased to **$0.16 per share** in May 2023. A new share repurchase program of an additional **$100 million** was authorized in August 2023[170](index=170&type=chunk)[171](index=171&type=chunk) [Results of Operations and Key Metrics](index=40&type=section&id=Results%20of%20Operations%20and%20Key%20Metrics) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Provides a consolidated overview of revenues, losses, expenses, and net income, along with loss and expense ratios, for the reported periods Consolidated Results - Three Months Ended June 30 (Amounts in thousands) | Metric | 2023 | 2022 | Increase (decrease) | Percentage change | |:---|:---|:---|:---|:---|\n| Total revenues | $277,522 | $273,541 | $3,981 | 1% | | Total losses and expenses | $63,375 | $12,654 | $50,721 | 401% | | Net income | $168,020 | $204,735 | $(36,715) | (18)% | | Loss ratio | (2)% | (26)% | | | | Expense ratio | 23% | 26% | | | Consolidated Results - Six Months Ended June 30 (Amounts in thousands) | Metric | 2023 | 2022 | Increase (decrease) | Percentage change | |:---|:---|:---|:---|:---|\n| Total revenues | $558,461 | $543,129 | $15,332 | 3% | | Total losses and expenses | $119,801 | $72,336 | $47,465 | 66% | | Net income | $344,008 | $369,365 | $(25,357) | (7)% | | Loss ratio | (3)% | (15)% | | | | Expense ratio (net earned premiums) | 23% | 25% | | | - Net income decreased by **18%** for the three months and **7%** for the six months ended June 30, 2023, primarily due to a larger reserve release in the prior year, partially offset by higher revenues and lower operating expenses in 2023[177](index=177&type=chunk)[185](index=185&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Acquisition and operating expenses, net of deferrals, decreased due to cost reduction initiatives, including a renegotiated shared services agreement with Genworth and a voluntary separation program[182](index=182&type=chunk)[190](index=190&type=chunk) [Use of Non-GAAP Financial Measures](index=43&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) Explains the use of "adjusted operating income" as a non-GAAP measure for evaluating core operating trends and peer comparisons - The company uses 'adjusted operating income' as a non-GAAP financial measure to evaluate core operating trends and enable peer comparisons, excluding net investment gains (losses) and restructuring costs[192](index=192&type=chunk)[193](index=193&type=chunk) Reconciliation of Net Income to Adjusted Operating Income (Amounts in thousands) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Net income | $168,020 | $204,735 | $344,008 | $369,365 | | Net investment (gains) losses | $13,001 | $381 | $13,123 | $720 | | Costs associated with reorganization | $41 | $104 | $(542) | $326 | | Taxes on adjustments | $(2,739) | $(102) | $(2,642) | $(220) | | Adjusted operating income | $178,323 | $205,118 | $353,947 | $370,191 | - Adjusted operating income decreased for both the three-month and six-month periods ended June 30, 2023, compared to 2022, primarily due to larger reserve releases in 2022[196](index=196&type=chunk)[197](index=197&type=chunk) [Key Metrics](index=45&type=section&id=Key%20Metrics) [New insurance written ("NIW")](index=45&type=section&id=New%20insurance%20written%20(%22NIW%22)) Reports new insurance written, broken down by underlying mortgage type, and discusses trends in loan concentrations New Insurance Written (NIW) (Amounts in millions) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Primary NIW | $15,083 | $17,448 | $28,237 | $36,271 | | Total NIW | $15,083 | $17,448 | $28,237 | $36,271 | - NIW decreased by **14%** for the three months and **22%** for the six months ended June 30, 2023, primarily due to lower originations driven by elevated mortgage rates[199](index=199&type=chunk)[200](index=200&type=chunk) Primary NIW by Underlying Type of Mortgage (Amounts in millions) | Type | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|:---|:---|\n| Purchases | $14,720 (98%) | $16,802 (96%) | $27,481 (97%) | $34,128 (94%) | | Refinances | $363 (2%) | $646 (4%) | $756 (3%) | $2,143 (6%) | - Monthly payment policies continue to dominate NIW, representing **98%** in Q2 2023, while single policies declined due to higher mortgage rates[205](index=205&type=chunk) - There's an increase in concentrations of loans with higher DTI ratios, aligning with market trends due to rising mortgage rates and home price appreciation impacting affordability[213](index=213&type=chunk) [Insurance in-force ("IIF") and Risk in-force ("RIF")](index=49&type=section&id=Insurance%20in-force%20(%22IIF%22)%20and%20Risk%20in-force%20(%22RIF%22)) Presents insurance in-force and risk in-force, including primary persistency rates and breakdown by policy year IIF and RIF (Amounts in millions) | Metric | June 30, 2023 | December 31, 2022 | June 30, 2022 | |:---|:---|:---|:---|\n| Primary IIF | $257,816 | $248,262 | $237,563 | | Total IIF | $258,285 | $248,767 | $238,127 | | Primary RIF | $65,714 | $62,791 | $59,911 | | Total RIF | $65,787 | $62,870 | $60,000 | - Primary IIF increased to **$257.8 billion** as of June 30, 2023, from **$248.3 billion** at December 31, 2022, driven by NIW and higher persistency rates[215](index=215&type=chunk)[216](index=216&type=chunk) - Primary RIF increased to **$65.7 billion** as of June 30, 2023, from **$62.8 billion** at December 31, 2022, primarily due to higher IIF[215](index=215&type=chunk)[216](index=216&type=chunk) - The primary persistency rate was **84%** for Q2 2023, up from **80%** in Q2 2022, reflecting lower lapse and cancellations due to higher interest rates[215](index=215&type=chunk) Primary IIF by Policy Year (Amounts in millions) | Policy Year | June 30, 2023 | December 31, 2022 | June 30, 2022 | |:---|:---|:---|:---|\n| 2021 | $76,381 (30%) | $81,724 (33%) | $86,175 (37%) | | 2022 | $61,390 (24%) | $63,577 (25%) | $35,426 (15%) | | 2023 | $27,629 (11%) | — | — | Primary RIF by Policy Year (Amounts in millions) | Policy Year | June 30, 2023 | December 31, 2022 | June 30, 2022 | |:---|:---|:---|:---|\n| 2021 | $19,245 (29%) | $20,418 (32%) | $21,384 (36%) | | 2022 | $15,392 (23%) | $15,907 (25%) | $8,884 (15%) | | 2023 | $7,132 (11%) | — | — | [Delinquent loans and claims](index=54&type=section&id=Delinquent%20loans%20and%20claims) Details the roll forward of primary loans in default, including new defaults, cures, and claims paid, along with direct case reserves and RIF by aged missed payment status Roll Forward of Primary Loans in Default (Loan count) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|\n| Number of delinquencies, beginning of period | 19,943 | 24,820 | | New defaults | 18,804 | 16,571 | | Cures | (20,380) | (21,666) | | Claims paid | (282) | (197) | | Number of delinquencies, end of period | 18,065 | 19,513 | - The number of primary delinquencies decreased to **18,065** at June 30, 2023, from **19,943** at the beginning of the period, as cures outpaced new defaults[238](index=238&type=chunk) Primary Delinquencies, Direct Case Reserves and RIF by Aged Missed Payment Status (June 30, 2023) | Payments in default | Delinquencies (count) | Direct primary case reserves (millions) | Risk in-force (millions) | Reserves as % of risk in-force | |:---|:---|:---|:---|:---|\n| 3 payments or less | 8,162 | $70 | $488 | 14% | | 4 - 11 payments | 6,229 | $186 | $409 | 46% | | 12 payments or more | 3,674 | $196 | $205 | 95% | | Total | 18,065 | $452 | $1,102 | 41% | - Reserves as a percentage of RIF remained flat at **41%** compared to December 31, 2022, but decreased from **48%** at June 30, 2022[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Loss reserves in policy years 2016 and newer represented approximately **96%** of primary RIF and **72%** of total direct primary case reserves as of June 30, 2023[255](index=255&type=chunk) [Investment Portfolio](index=59&type=section&id=Investment%20Portfolio) Describes the company's investment portfolio as a primary source of claims paying resources, focusing on its composition, strategy, and credit quality - The investment portfolio is a primary source of claims paying resources, primarily consisting of diverse, highly-rated fixed income securities[256](index=256&type=chunk) - Investment strategy focuses on meeting policyholder obligations, preserving capital, generating income, maximizing statutory capital, and increasing shareholder value[256](index=256&type=chunk) Fixed Maturity Securities Available-for-Sale (Amounts in thousands) | Investment Type | Fair value (June 30, 2023) | % of total | Fair value (December 31, 2022) | % of total | |:---|:---|:---|:---|:---|\n| U.S. corporate | $2,509,479 | 51% | $2,646,863 | 54% | | Other asset-backed | $1,207,764 | 25% | $1,100,036 | 23% | | Total | $4,915,039 | 100% | $4,884,760 | 100% | - As of June 30, 2023, **98%** of the investment portfolio was rated investment grade, with an effective duration of **3.7 years** and a pre-tax yield of **3.4%**[261](index=261&type=chunk)[262](index=262&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash flows, capital adequacy, dividend capacity, and financial strength ratings Consolidated Cash Flows (Amounts in thousands) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | |:---|:---|:---|\n| Net cash provided by operating activities | $287,185 | $301,745 | | Net cash provided by (used in) investing activities | $2,349 | $(120,828) | | Net cash used in financing activities | $(111,893) | $(22,798) | | Net increase in cash and cash equivalents | $177,641 | $158,119 | - Cash and cash equivalents increased to **$691 million** as of June 30, 2023, from **$514 million** at December 31, 2022, supported by positive cash flows from operating and investing activities[267](index=267&type=chunk)[284](index=284&type=chunk) - EMICO has the capacity to pay dividends from unassigned surplus of **$349 million** as of June 30, 2023, subject to NCDOI notice and approval[272](index=272&type=chunk) - EMICO's statutory risk-to-capital ratio was **11.9:1** as of June 30, 2023, well below the **25:1** maximum, indicating strong capital adequacy[284](index=284&type=chunk) EMICO Financial Strength Ratings | Name of Agency | Rating | Outlook | Action | Date of Rating | |:---|:---|:---|:---|:---|\n| Moody's Investor Service, Inc. | A3 | Stable | Upgrade | March 1, 2023 | | Fitch Ratings, Inc. | A | Stable | Upgrade | April 25, 2023 | | S&P Global Ratings | BBB+ | Stable | Upgrade | February 16, 2023 | | A.M. Best | A- | Stable | Initial | August 1, 2023 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks within its investment portfolio, primarily focusing on interest rate risk, credit quality, and concentration risk - The investment portfolio is exposed to market risks, including changes in interest rates, term structure of interest rates, credit quality, concentration risk, and prepayment risk[294](index=294&type=chunk)[295](index=295&type=chunk) - Market risk is managed through defined investment policy guidelines, with oversight from the Board of Directors and senior management[294](index=294&type=chunk) - As of June 30, 2023, the effective duration of available-for-sale investments was **3.7 years**, indicating a **3.7%** change in fair value for a **100 basis point** parallel shift in the yield curve[296](index=296&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2023, and reports no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023[298](index=298&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2023[299](index=299&type=chunk) [Part II. Other Information](index=68&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any pending material legal proceedings - The company is not subject to any pending material legal proceedings[301](index=301&type=chunk) [Item 1A. Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) This section reiterates that there have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[302](index=302&type=chunk) [Item 2. Recent Sales of Unregistered Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities during the second quarter of 2023, including the number of shares purchased, average price, and remaining authorization Issuer Purchases of Equity Securities - Three Months Ended June 30, 2023 (Amounts in thousands except per share amounts) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs | |:---|:---|:---|:---|:---|\n| April 1 - April 30, 2023 | 353,416 | $23.73 | 353,416 | $42,908 | | May 1 - May 31, 2023 | 944,489 | $23.85 | 944,489 | $20,382 | | June 1 - June 30, 2023 | 407,264 | $25.15 | 407,264 | $10,140 | | Total | 1,705,169 | $24.13 | 1,705,169 | $10,140 | - During Q2 2023, the company repurchased **1,705,169 shares** at an average price of **$24.13 per share**, with **$10.1 million** remaining under the **$75 million** authorization[304](index=304&type=chunk) - Subsequent to quarter end, an additional **241,946 shares** were purchased through July 31, 2023, at an average price of **$25.96**[305](index=305&type=chunk) [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) This section announces a new $100 million share repurchase program and confirms no new Rule 10b5-1 trading arrangements by directors or officers - A new share repurchase program for an additional **$100 million** of EHI common stock was authorized on August 1, 2023, with no specified expiration date[306](index=306&type=chunk) - The new program includes an agreement with Genworth Holdings, Inc. to repurchase its EHI shares on a pro rata basis, not expected to change Genworth's ownership interest[306](index=306&type=chunk) - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2023[308](index=308&type=chunk) [Item 6. Exhibits and Financial Statement Schedules](index=70&type=section&id=Item%206.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-Q, including the Share Repurchase Agreement, certifications from principal executive and financial officers, and Inline XBRL documents - Key exhibits include the Share Repurchase Agreement dated August 1, 2023, certifications of the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents[311](index=311&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net income of $176 million or $1.08 per diluted share, which is up 7% year-over-year [6][20] - Return on equity was 17%, reflecting strong financial performance [6] - Insurance in-force reached a record $253 billion, up $21 billion or 9% year-over-year [7][21] - The loss ratio for the quarter was negative 5%, indicating a reserve release of $70 million [10][25] Business Line Data and Key Metrics Changes - New insurance written (NIW) was $13 billion, down 30% year-over-year due to lower mortgage originations [21] - Persistency remained high at 85%, up 9 percentage points year-over-year, supporting insurance in-force growth [22] - The weighted average FICO score in the portfolio was 744, with a loan-to-value ratio of 93% [9] Market Data and Key Metrics Changes - The pricing environment remained constructive, with pricing across the industry trending upwards [8] - Elevated interest rates have dampened mortgage origination volumes, but persistency has counterbalanced this effect [8][12] - The company expects the MI market size to be around $300 billion for 2023, down from 2022 levels [62] Company Strategy and Development Direction - The company is focused on disciplined capital allocation, supporting policyholders, enhancing product offerings, and returning capital to shareholders [15][31] - The commitment to a strong balance sheet and financial flexibility is emphasized, with PMIERs sufficiency at 164% [13][30] - The company aims to enhance and diversify its platform while maintaining operational excellence [10][15] Management's Comments on Operating Environment and Future Outlook - Management noted that while the macro environment remains uncertain, several positive economic factors support the MI industry [11] - The company is confident in the long-term strength of the MI industry despite short-term economic challenges [12] - Management highlighted the importance of maintaining a strong balance sheet and financial flexibility in the current environment [13][30] Other Important Information - The company received ratings upgrades from S&P and Moody's, enhancing its competitive position [14] - A 14% increase in the quarterly dividend to $0.16 per share was announced, reflecting confidence in cash flows [16][32] - The company released its inaugural ESG report, highlighting its commitment to corporate responsibility [18][19] Q&A Session Summary Question: Investment income outlook - Management discussed factors affecting investment income, including lower bond calls and cash accumulation impacting reinvestment rates [36][38] Question: Premium yield trajectory - Management indicated that while premium rates may fluctuate, they expect a decline less than in 2022, with a stable outlook for the year [39][40] Question: Ratings upgrades and GSE conditions - Management explained that the ratings upgrades and lifting of GSE conditions provide additional financial flexibility and support competitive positioning [42][46] Question: Premium rates and persistency - Management noted that persistency remains elevated due to high interest rates, and they expect it to remain strong in the near term [53][55] Question: Claims payments normalization - Management indicated that the timeline for claims development remains a couple of quarters out as servicers work to resolve delinquencies [56][57] Question: New insurance written and market share - Management expressed satisfaction with the $13 billion of new insurance written and emphasized a focus on quality over market share [59][61]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023, along with market risk disclosures and controls [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Enact Holdings, Inc.'s unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, income statements, comprehensive income, changes in equity, cash flows, and detailed explanatory notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2023, and December 31, 2022 | Metric | March 31, 2023 (Thousands) | December 31, 2022 (Thousands) | Change (Thousands) | % Change | | :-------------------------------- | :-------------------------- | :--------------------------- | :----------------- | :------- | | Total investments | $4,931,812 | $4,887,807 | $44,005 | 0.90% | | Cash and cash equivalents | $621,621 | $513,775 | $107,846 | 21.00% | | Total assets | $5,842,231 | $5,709,149 | $133,082 | 2.33% | | Loss reserves | $501,427 | $519,008 | $(17,581) | -3.39% | | Total liabilities | $1,545,610 | $1,608,241 | $(62,631) | -3.89% | | Total equity | $4,296,621 | $4,100,908 | $195,713 | 4.77% | [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This table presents the company's financial performance, including revenues, expenses, and net income, for the three months ended March 31, 2023, and 2022 | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | Change (Thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------- | :------- | | Premiums | $235,108 | $234,279 | $829 | 0.35% | | Net investment income | $45,341 | $35,146 | $10,195 | 29.01% | | Total revenues | $280,939 | $269,588 | $11,351 | 4.21% | | Losses incurred | $(10,984) | $(10,446) | $(538) | 5.15% | | Total losses and expenses | $56,426 | $59,682 | $(3,256) | -5.46% | | Income before income taxes | $224,513 | $209,906 | $14,607 | 6.96% | | Net income | $175,988 | $164,630 | $11,358 | 6.90% | | Basic EPS | $1.08 | $1.01 | $0.07 | 6.93% | | Diluted EPS | $1.08 | $1.01 | $0.07 | 6.93% | [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table details the company's comprehensive income, including net income and other comprehensive income components, for the three months ended March 31, 2023, and 2022 | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | Change (Thousands) | | :-------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------- | | Net income | $175,988 | $164,630 | $11,358 | | Net unrealized gains (losses) on securities | $62,510 | $(224,300) | $286,810 | | Total comprehensive income (loss) | $238,490 | $(59,641) | $298,131 | [Condensed Consolidated Statements of Changes in Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This table outlines the changes in the company's total equity, including net income, other comprehensive income, share repurchases, and dividends, from December 31, 2022, to March 31, 2023 | Metric | December 31, 2022 (Thousands) | March 31, 2023 (Thousands) | Change (Thousands) | | :-------------------------------- | :-------------------------- | :------------------------- | :----------------- | | Total equity (beginning balance) | $4,100,908 | $4,100,908 | - | | Net income | - | $175,988 | $175,988 | | Other comprehensive loss, net of taxes | - | $62,502 | $62,502 | | Repurchase of common stock | - | $(22,200) | $(22,200) | | Dividends | - | $(22,756) | $(22,756) | | Total equity (ending balance) | $4,100,908 | $4,296,621 | $195,713 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023, and 2022 | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | Change (Thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :----------------- | | Net cash provided by operating activities | $119,339 | $160,829 | $(41,490) | | Net cash provided by (used in) investing activities | $33,463 | $(146,497) | $179,960 | | Net cash used in financing activities | $(44,956) | $0 | $(44,956) | | Net increase in cash and cash equivalents | $107,846 | $14,332 | $93,514 | | Cash and cash equivalents at end of period | $621,621 | $440,160 | $181,461 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's business, accounting policies, and specific financial statement line items [(1) Nature of business, organization structure and basis of presentation](index=11&type=section&id=(1)%20Nature%20of%20business,%20organization%20structure%20and%20basis%20of%20presentation) This note describes Enact Holdings, Inc.'s core business as residential mortgage guaranty insurance and its operating structure through EMICO - Enact Holdings, Inc. (EHI) is engaged in residential mortgage guaranty insurance, protecting lenders and investors against losses from mortgage nonpayment, primarily offering primary mortgage insurance for low down payment loans and performing fee-based contract underwriting services[26](index=26&type=chunk)[27](index=27&type=chunk) - EHI operates through its primary insurance subsidiary, Enact Mortgage Insurance Corporation (EMICO), which is approved by Fannie Mae and Freddie Mac (GSEs)[27](index=27&type=chunk) [(2) Accounting changes](index=12&type=section&id=(2)%20Accounting%20changes) This note confirms no significant new accounting pronouncements were adopted or are expected to materially impact the financial statements - The company has not adopted any new accounting pronouncements in 2023, and there are no significant new accounting pronouncements impacting its financial statements that are not yet adopted[32](index=32&type=chunk) [(3) Investments](index=12&type=section&id=(3)%20Investments) This note provides detailed information on the company's investment portfolio, including income sources, gains/losses, and contractual maturities Net Investment Income Sources | Source | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | Change (Thousands) | % Change | | :-------------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------- | :------- | | Fixed maturity securities available-for-sale | $41,375 | $36,534 | $4,841 | 13.25% | | Cash, cash equivalents and short-term investments | $5,620 | $10 | $5,610 | 56100.00%| | Gross investment income before expenses and fees | $46,995 | $36,544 | $10,451 | 28.60% | | Investment expenses and fees | $(1,654) | $(1,398) | $(256) | 18.31% | | Net investment income | $45,341 | $35,146 | $10,195 | 29.01% | Net Investment Gains (Losses) | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | Change (Thousands) | | :-------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------- | | Net realized gains (losses) | $(122) | $(512) | $390 | | Net change in allowance for credit losses | $0 | $173 | $(173) | | Net investment gains (losses) | $(122) | $(339) | $217 | Net Unrealized Investment Gains (Losses) in AOCI | Metric | March 31, 2023 (Thousands) | December 31, 2022 (Thousands) | Change (Thousands) | | :------------------------------------ | :------------------------- | :---------------------------- | :----------------- | | Net unrealized gains (losses) on investment securities | $(407,456) | $(486,943) | $79,487 | | Income taxes | $87,070 | $104,047 | $(16,977) | | Net unrealized investment gains (losses) | $(320,386) | $(382,896) | $62,510 | - The change in net unrealized gains (losses) on available-for-sale securities reported in AOCI was a **gain of $62.5 million** for the three months ended March 31, 2023, compared to a **loss of $224.3 million** in the prior year, primarily due to unrealized gains on investment securities[38](index=38&type=chunk) - As of March 31, 2023, the company's total fixed maturity securities available-for-sale had a **fair value of $4.93 billion**, with gross unrealized losses of **$414.1 million**, primarily due to changes in interest rates and market volatility, not credit losses[40](index=40&type=chunk)[43](index=43&type=chunk) - The majority of fixed maturity securities with unrealized losses (over **$370 million**) have been in a continuous unrealized loss position for 12 months or more, but the company expects to recover amortized cost and does not intend to sell them prematurely[42](index=42&type=chunk)[44](index=44&type=chunk) Contractual Maturities of Fixed Maturity Securities (March 31, 2023) | Maturity Period | Amortized cost (Thousands) | Fair value (Thousands) | | :-------------------------- | :------------------------- | :--------------------- | | Due one year or less | $187,395 | $185,488 | | Due after one year through five years | $2,323,642 | $2,186,748 | | Due after five years through ten years | $1,386,185 | $1,218,687 | | Due after ten years | $232,482 | $203,044 | | Residential mortgage-backed | $10,448 | $10,344 | | Other asset-backed | $1,196,902 | $1,125,316 | | Total | $5,337,054 | $4,929,627 | - As of March 31, 2023, finance and insurance (**33%**), technology and communications (**13%**), consumer—non-cyclical (**12%**), and utilities (**10%**) were the largest industry group concentrations in the corporate fixed maturity securities portfolio[48](index=48&type=chunk) [(4) Fair value](index=17&type=section&id=(4)%20Fair%20value) This note explains the methodologies used to estimate the fair value of financial instruments and provides a breakdown of measurements by level - The company's fixed maturity securities and short-term investments are carried at fair value, estimated using third-party pricing services, internal models, and/or broker quotes, primarily employing market or income approaches[52](index=52&type=chunk)[53](index=53&type=chunk) - Approximately **89%** of the investment portfolio was priced using third-party pricing services as of March 31, 2023, generally classified as Level 2, utilizing publicly available data inputs[58](index=58&type=chunk) - Level 3 measurements, representing significant unobservable inputs, accounted for **$291.4 million** of fixed maturity securities as of March 31, 2023, down from **$319.3 million** at December 31, 2022[76](index=76&type=chunk) Fair Value Measurements by Level (March 31, 2023) | Asset Class | Total (Thousands) | Level 1 (Thousands) | Level 2 (Thousands) | Level 3 (Thousands) | | :-------------------------- | :---------------- | :------------------ | :------------------ | :------------------ | | U.S. government, agencies and GSEs | $42,709 | $0 | $42,709 | $0 | | State and political subdivisions | $431,778 | $0 | $431,778 | $0 | | Non-U.S. government | $9,493 | $0 | $9,493 | $0 | | U.S. corporate | $2,679,485 | $0 | $2,463,155 | $216,330 | | Non-U.S. corporate | $630,502 | $0 | $556,371 | $74,131 | | Residential mortgage-backed | $10,344 | $0 | $10,344 | $0 | | Other asset-backed | $1,125,316 | $0 | $1,124,332 | $984 | | Total fixed maturity securities | $4,929,627 | $0 | $4,638,182 | $291,445 | | Short-term investments | $2,185 | $0 | $2,185 | $0 | | Total | $4,931,812 | $0 | $4,640,367 | $291,445 | Long-term Borrowings Fair Value | Metric | March 31, 2023 (Thousands) | December 31, 2022 (Thousands) | | :------------------ | :------------------------- | :---------------------------- | | Carrying amount | $743,460 | $742,830 | | Fair value | $733,298 | $739,020 | [(5) Loss reserves](index=24&type=section&id=(5)%20Loss%20reserves) This note details the activity and composition of the company's loss reserves, including incurred losses and favorable adjustments Loss Reserves Activity | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Loss reserves, beginning balance | $519,008 | $641,325 | | Losses and LAE incurred (current accident year) | $60,298 | $41,274 | | Losses and LAE incurred (prior accident years) | $(71,329) | $(51,707) | | Total incurred | $(11,031) | $(10,433) | | Total paid | $(6,653) | $(5,617) | | Loss reserves, ending balance | $501,427 | $625,279 | - For Q1 2023, the company recorded favorable adjustments of **$70 million** on prior accident year reserves, primarily due to better-than-expected cure performance of COVID-19 related delinquencies from 2020 and 2021[95](index=95&type=chunk) - Losses and LAE incurred for the current accident year were **$60 million**, mainly from new delinquencies[95](index=95&type=chunk) [(6) Reinsurance](index=25&type=section&id=(6)%20Reinsurance) This note outlines the effects of reinsurance on premiums and describes recent reinsurance transactions Effects of Reinsurance on Premiums | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | | :------------------ | :------------------------------------------ | :------------------------------------------ | | Net premiums written | $221,071 | $224,371 | | Net premiums earned | $235,108 | $234,279 | - The decrease in unearned premiums for Q1 2023, leading to higher earned premiums than written, was primarily due to policy cancellations in the single premium mortgage insurance product[96](index=96&type=chunk) - On March 8, 2023, the company executed a new excess-of-loss reinsurance transaction providing up to **$180 million** of coverage for the 2023 book year, effective January 1, 2023[100](index=100&type=chunk) [(7) Borrowings](index=26&type=section&id=(7)%20Borrowings) This note provides information on the company's long-term debt and revolving credit facility Long-term Borrowings | Metric | March 31, 2023 (Thousands) | December 31, 2022 (Thousands) | | :------------------------ | :------------------------- | :---------------------------- | | 6.5% Senior Notes, due 2025 | $750,000 | $750,000 | | Deferred borrowing charges | $(6,540) | $(7,170) | | Total | $743,460 | $742,830 | - The company has a five-year, unsecured revolving credit facility of **$200 million**, undrawn as of March 31, 2023, and is in compliance with all associated covenants[103](index=103&type=chunk)[104](index=104&type=chunk) [(8) Income taxes](index=27&type=section&id=(8)%20Income%20taxes) This note details the company's provision for income taxes and effective tax rate - The provision for income taxes is computed using a separate return with benefits-for-loss method, resulting in an effective tax rate of **21.6%** for both Q1 2023 and Q1 2022, consistent with the U.S. corporate federal income tax rate[105](index=105&type=chunk)[162](index=162&type=chunk) [(9) Related party transactions](index=27&type=section&id=(9)%20Related%20party%20transactions) This note discloses transactions and balances with related parties, primarily Genworth Related Party Transactions with Genworth | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Costs incurred for administrative/operating services | $4,700 | $7,800 | | Investment expenses paid to Genworth | $1,600 | $1,400 | | Charges to Genworth for IT/administrative services | $100 | $200 | Related Party Balances with Genworth | Metric | March 31, 2023 (Thousands) | December 31, 2022 (Thousands) | | :------------------------ | :------------------------- | :---------------------------- | | Amounts payable to Genworth | $8,910 | $9,291 | | Amounts receivable from Genworth | $153 | $167 | [(10) Net income per common share](index=28&type=section&id=(10)%20Net%20income%20per%20common%20share) This note presents the basic and diluted net income per common share for the periods presented Net Income Per Common Share | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net income available to EHI common stockholders | $175,988 (Thousands) | $164,630 (Thousands) | | Basic EPS | $1.08 | $1.01 | | Diluted EPS | $1.08 | $1.01 | | Weighted average common shares outstanding (Basic) | 162,442 (Thousands) | 162,841 (Thousands) | | Weighted average common shares outstanding (Diluted) | 163,179 (Thousands) | 163,054 (Thousands) | [(11) Changes in accumulated other comprehensive income](index=29&type=section&id=(11)%20Changes%20in%20accumulated%20other%20comprehensive%20income) This note details the changes in accumulated other comprehensive income, including unrealized investment gains/losses and reclassifications Roll Forward of Accumulated Other Comprehensive Income (Q1 2023) | Metric | Net unrealized investment gains (losses) (Thousands) | Foreign currency translation (Thousands) | Total (Thousands) | | :------------------------------------------ | :--------------------------------------------------- | :--------------------------------------- | :---------------- | | Balance as of January 1, 2023, net of tax | $(382,896) | $152 | $(382,744) | | Other comprehensive income (loss) before reclassifications | $62,414 | $(8) | $62,406 | | Amounts reclassified from other comprehensive income (loss) | $96 | $0 | $96 | | Total other comprehensive income (loss) | $62,510 | $(8) | $62,502 | | Balance as of March 31, 2023, net of tax | $(320,386) | $144 | $(320,242) | Effect of Reclassifications on Income Statement | Affected line item in the condensed consolidated statements of income | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | | :------------------------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net investment gains (losses) | $(122) | $(512) | | Provision for income taxes | $26 | $108 | [(12) Stockholders' equity](index=29&type=section&id=(12)%20Stockholders'%20equity) This note provides information on share repurchase programs and dividend payments - The Board approved a **$75 million** share repurchase program on November 1, 2022. During Q1 2023, the company repurchased **916,776 shares** for **$22.2 million** at an average price of **$24.19 per share**, with **$51.3 million** remaining available[115](index=115&type=chunk)[117](index=117&type=chunk) - The company paid a quarterly cash dividend of **$0.14 per share** in Q1 2023 and announced an increase to **$0.16 per share** for the next quarterly dividend in June 2023[118](index=118&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, key factors, economic trends, operational results, investment portfolio, liquidity, and capital resources for Q1 2023 [Key Factors Affecting Our Results](index=31&type=section&id=Key%20Factors%20Affecting%20Our%20Results) This section confirms no material changes to the key factors affecting the company's results beyond those discussed in the trends and conditions - There have been no material changes to the factors affecting the company's results compared to those disclosed in the Annual Report, other than the impact of trends and conditions discussed in the subsequent section[122](index=122&type=chunk) [Trends and Conditions](index=31&type=section&id=Trends%20and%20Conditions) This section discusses macroeconomic conditions, housing market dynamics, regulatory changes, and their impact on the company's business and capital position - The U.S. economy experienced continued volatility in Q1 2023 due to inflationary pressure, geopolitical environment, and banking sector distress, though the housing market has not been directly permeated[123](index=123&type=chunk) - Inflationary pressures lessened but remained elevated (CPI **5.0% YoY** in March), with the Federal Reserve continuing aggressive interest rate increases (**25 basis points** in May and March 2023), leading to increased market volatility[124](index=124&type=chunk) - Mortgage origination activity remained slow due to rising mortgage rates, impacting the refinance market, while housing affordability is challenged by higher rates and elevated home prices, though national housing prices stabilized in Q1 2023 after declining in late 2022[125](index=125&type=chunk) - The unemployment rate was **3.5%** as of March 31, 2023, consistent with Q4 2022, with unemployed Americans and long-term unemployed remaining relatively in line with pre-COVID-19 levels[126](index=126&type=chunk) - Total delinquencies decreased in Q1 2023 as cures outpaced new delinquencies, with the new delinquency rate at **1.0%**, and approximately **1.4%** of active primary policies were in forbearance, with **34%** of those delinquent[128](index=128&type=chunk) - The GSEs' COVID-19 related policies, including forbearance, remain in effect, and new loss mitigation programs were announced in March 2023, potentially extending foreclosure timelines[127](index=127&type=chunk) - Regulatory changes by FHFA and FHA, including targeted changes to GSE guarantee fee pricing and a **30-basis point** reduction in FHA annual insurance premiums, are expected to have a limited net impact on the private mortgage insurance market[132](index=132&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - The company's market share is influenced by pricing competitiveness and selective participation in forward commitment transactions, with new insurance written (NIW) decreasing **30%** in Q1 2023 due to lower originations[137](index=137&type=chunk)[138](index=138&type=chunk) - Primary persistency rate increased to **85%** in Q1 2023 (from **76%** in Q1 2022) due to lower refinance activity, offsetting the decline in NIW and leading to a **$4.3 billion** increase in primary insurance in-force (IIF)[138](index=138&type=chunk) - EMICO's risk-to-capital ratio was approximately **12.7:1** as of March 31, 2023, remaining below the NCDOI's maximum of **25:1**[145](index=145&type=chunk) - GSE Restrictions on capital, which required EMICO to maintain higher PMIERs minimums and EHI to retain **$300 million** from senior notes, were lifted as of December 31, 2022, enhancing financial flexibility[149](index=149&type=chunk)[150](index=150&type=chunk) - PMIERs sufficiency was **164%** (**$2,098 million** above requirements) as of March 31, 2023, relatively flat from December 31, 2022, benefiting from a **0.30 multiplier** for certain non-performing loans[151](index=151&type=chunk) - EMICO received credit rating upgrades from S&P Global Ratings (**BBB to BBB+**), Moody's (**Baa1 to A3**), and Fitch (**BBB+ to A-**), reflecting strong performance and capital adequacy[152](index=152&type=chunk) - The company initiated a quarterly dividend program in April 2022, paying **$0.14 per share** in Q1 2023, and increased the next quarterly dividend to **$0.16 per share**, supported by EMICO distributions[155](index=155&type=chunk) [Results of Operations and Key Metrics](index=37&type=section&id=Results%20of%20Operations%20and%20Key%20Metrics) This section analyzes the company's financial performance, including revenues, expenses, and key operational metrics [Revenues](index=37&type=section&id=Revenues) This section details the drivers behind the company's revenue changes, including investment income and premiums - Total revenues increased by **4%** to **$280.9 million** in Q1 2023, driven by a **29%** increase in net investment income due to higher yields and average invested assets, partially offset by lower income from bond calls[158](index=158&type=chunk)[159](index=159&type=chunk) - Premiums increased slightly due to insurance in-force growth, partially offset by the lapse of older, higher-priced policies and a decrease in single premium cancellations[159](index=159&type=chunk) [Losses and expenses](index=37&type=section&id=Losses%20and%20expenses) This section explains the changes in losses incurred and operating expenses, highlighting reserve adjustments and delinquency impacts - Losses incurred decreased in Q1 2023 due to a **$70 million** reserve release on prior years' delinquencies, primarily from favorable cure performance on COVID-19 related delinquencies from 2020 and 2021[160](index=160&type=chunk) - Current period primary delinquencies (**9,599 loans**) contributed **$58 million** of loss expense in Q1 2023, compared to **$39 million** from **8,724 delinquencies** in Q1 2022[160](index=160&type=chunk)[161](index=161&type=chunk) - Acquisition and operating expenses, net of deferrals, decreased due to declines in corporate overhead and variable costs, leading to a slight decrease in the expense ratio[161](index=161&type=chunk) [Provision for income taxes](index=38&type=section&id=Provision%20for%20income%20taxes) This section discusses the company's effective tax rate and its consistency with federal income tax rates - The effective tax rate remained consistent at **21.6%** for both Q1 2023 and Q1 2022, aligning with the U.S. corporate federal income tax rate[162](index=162&type=chunk) [Use of Non-GAAP Financial Measures](index=38&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section explains the use of adjusted operating income as a non-GAAP measure for evaluating core operating trends and peer comparisons - The company uses 'adjusted operating income' (a non-GAAP measure) to evaluate core operating trends and enable peer comparisons, excluding net investment gains/losses and infrequent non-operating items[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) Reconciliation of Net Income to Adjusted Operating Income | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $175,988 | $164,630 | | Net investment (gains) losses | $122 | $339 | | Costs associated with reorganization | $(583) | $222 | | Taxes on adjustments | $97 | $(118) | | Adjusted operating income | $175,624 | $165,073 | - Adjusted operating income increased in Q1 2023 compared to Q1 2022, primarily due to higher investment income and lower expenses[165](index=165&type=chunk) [Key Metrics](index=39&type=section&id=Key%20Metrics) This section provides an overview of critical operational metrics, including new insurance written, insurance in-force, and delinquency rates [New insurance written ("NIW")](index=39&type=section&id=New%20insurance%20written%20(%22NIW%22)) This section details the volume and composition of new insurance written, categorized by mortgage type and FICO score Selected Operating Performance Measures | Metric | March 31, 2023 | March 31, 2022 | | :-------------------------- | :------------- | :------------- | | New insurance written | $13,154M | $18,823M | | Primary insurance in-force | $252,516M | $231,853M | | Primary risk in-force | $64,106M | $58,295M | | Persistency rate | 85% | 76% | | Policies in-force (count) | 965,544 | 941,689 | | Delinquent loans (count) | 18,633 | 22,571 | | Delinquency rate | 1.93% | 2.40% | - NIW decreased **30%** to **$13.2 billion** in Q1 2023 compared to Q1 2022, primarily due to lower originations driven by elevated mortgage rates[138](index=138&type=chunk)[167](index=167&type=chunk) Primary NIW by Underlying Mortgage Type | Mortgage Type | Q1 2023 (Millions) | Q1 2023 (%) | Q1 2022 (Millions) | Q1 2022 (%) | | :------------ | :----------------- | :---------- | :----------------- | :---------- | | Purchases | $12,761 | 97% | $17,326 | 92% | | Refinances | $393 | 3% | $1,497 | 8% | | Total | $13,154 | 100% | $18,823 | 100% | Primary NIW by FICO Score (Q1 2023 vs Q1 2022) | FICO Score | Q1 2023 (Millions) | Q1 2023 (%) | Q1 2022 (Millions) | Q1 2022 (%) | | :--------- | :----------------- | :---------- | :----------------- | :---------- | | Over 760 | $6,004 | 46% | $8,359 | 45% | | 740-759 | $2,268 | 17% | $3,085 | 16% | | 720-739 | $1,817 | 14% | $2,515 | 13% | | 700-719 | $1,296 | 10% | $1,952 | 10% | | 680-699 | $954 | 7% | $1,316 | 7% | | 660-679 | $517 | 4% | $931 | 5% | | 640-659 | $229 | 2% | $486 | 3% | | 620-639 | $65 | 0% | $173 | 1% | | <620 | $4 | 0% | $6 | 0% | | Total | $13,154 | 100% | $18,823 | 100% | - The company observed an increase in concentrations of loans with higher Debt-to-Income (DTI) ratios, aligning with market trends where rising mortgage rates and home price appreciation pressure affordability[171](index=171&type=chunk) [Insurance in-force ("IIF") and Risk in-force ("RIF")](index=42&type=section&id=Insurance%20in-force%20(%22IIF%22)%20and%20Risk%20in-force%20(%22RIF%22)) This section provides an analysis of the company's insurance and risk in-force, segmented by origination type and policy year - Primary IIF increased to **$252.5 billion** as of March 31, 2023, from **$248.3 billion** at December 31, 2022, driven by NIW and higher persistency (**85%** in Q1 2023 vs. **76%** in Q1 2022) due to higher interest rates and a low refinance market[172](index=172&type=chunk) Primary IIF and RIF by Origination (March 31, 2023) | Metric | IIF (Millions) | IIF (%) | RIF (Millions) | RIF (%) | | :------------- | :------------- | :------ | :------------- | :------ | | Purchases | $214,339 | 85% | $55,870 | 87% | | Refinances | $38,177 | 15% | $8,236 | 13% | | Total | $252,516 | 100% | $64,106 | 100% | Primary RIF by Policy Year (March 31, 2023) | Policy Year | RIF (Millions) | RIF (%) | | :---------- | :------------- | :------ | | 2008 and prior | $1,643 | 3% | | 2009 to 2015 | $1,238 | 2% | | 2016 | $1,538 | 2% | | 2017 | $1,632 | 3% | | 2018 | $1,672 | 3% | | 2019 | $3,989 | 6% | | 2020 | $13,484 | 21% | | 2021 | $19,917 | 31% | | 2022 | $15,647 | 24% | | 2023 | $3,346 | 5% | | Total | $64,106 | 100% | - As of March 31, 2023, policy years 2016 and newer represented approximately **95%** of primary RIF and **68%** of total direct primary case reserves, indicating a shift in loss reserves to newer book years[193](index=193&type=chunk) [Delinquent loans and claims](index=45&type=section&id=Delinquent%20loans%20and%20claims) This section presents data on delinquent loans, including roll-forward activity, aged status, and geographic distribution Primary Loans in Default Roll Forward | Metric | Three months ended March 31, 2023 (Loan count) | Three months ended March 31, 2022 (Loan count) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Number of delinquencies, beginning of period | 19,943 | 24,820 | | New defaults | 9,599 | 8,724 | | Cures | (10,771) | (10,860) | | Claims paid | (126) | (107) | | Rescissions and claim denials | (12) | (6) | | Number of delinquencies, end of period | 18,633 | 22,571 | - The total number of primary delinquencies decreased from **19,943** at December 31, 2022, to **18,633** at March 31, 2023, with cures outpacing new defaults[180](index=180&type=chunk) Primary Delinquencies by Aged Missed Payment Status (March 31, 2023) | Payments in default | Delinquencies (Count) | Direct primary case reserves (Millions) | Risk in-force (Millions) | Reserves as % of risk in-force | | :------------------ | :-------------------- | :-------------------------------------- | :----------------------- | :----------------------------- | | 3 payments or less | 7,876 | $67 | $462 | 14% | | 4-11 payments | 6,714 | $182 | $423 | 43% | | 12 payments or more | 4,043 | $213 | $220 | 97% | | Total | 18,633 | $462 | $1,105 | 42% | - Reserves as a percentage of RIF remained flat at **42%** compared to December 31, 2022, but decreased from **47%** at March 31, 2022. The number of long-term delinquencies (**12+ payments**) remains elevated due to COVID-19 forbearance and foreclosure delays[181](index=181&type=chunk)[184](index=184&type=chunk) Primary Delinquency Rates for Top 10 States by RIF (March 31, 2023) | State | Percent of RIF | Percent of direct primary case reserves | Delinquency rate | | :------------- | :------------- | :-------------------------------------- | :--------------- | | California | 12% | 11% | 1.99% | | Texas | 8% | 7% | 1.92% | | Florida | 8% | 8% | 2.24% | | New York | 5% | 13% | 2.82% | | Illinois | 5% | 6% | 2.51% | | Arizona | 4% | 2% | 1.68% | | Michigan | 4% | 3% | 1.72% | | North Carolina | 3% | 2% | 1.48% | | Georgia | 3% | 3% | 2.19% | | Washington | 3% | 3% | 1.64% | | All other states | 45% | 42% | 1.79% | | Total | 100% | 100% | 1.93% | [Investment Portfolio](index=51&type=section&id=Investment%20Portfolio) This section describes the company's investment strategy, portfolio composition, and key characteristics like duration and yield - The investment portfolio, managed by the Enact Investment Committee and Genworth, aims to meet policyholder obligations, preserve capital, generate income, maximize statutory capital, and increase shareholder value[194](index=194&type=chunk) - The investment strategy focuses on diversification across highly rated fixed income securities, active yield enhancement, and continuous monitoring of quality, duration, and liquidity, while restricting investments correlated to the residential mortgage market[195](index=195&type=chunk) Fixed Maturity Securities Available-for-Sale (Fair Value) | Asset Class | March 31, 2023 (Thousands) | March 31, 2023 (%) | December 31, 2022 (Thousands) | December 31, 2022 (%) | | :-------------------------- | :------------------------- | :----------------- | :---------------------------- | :-------------------- | | U.S. government, agencies and GSEs | $42,709 | 1% | $44,769 | 1% | | State and political subdivisions | $431,778 | 9% | $419,856 | 9% | | Non-U.S. government | $9,493 | 0% | $9,349 | 0% | | U.S. corporate | $2,679,485 | 54% | $2,646,863 | 54% | | Non-U.S. corporate | $630,502 | 13% | $652,844 | 13% | | Residential mortgage-backed | $10,344 | 0% | $11,043 | 0% | | Other asset-backed | $1,125,316 | 23% | $1,100,036 | 23% | | Total | $4,929,627 | 100% | $4,884,760 | 100% | - As of both March 31, 2023, and December 31, 2022, **98%** of the investment portfolio was rated investment grade[198](index=198&type=chunk) Investment Portfolio Duration and Yield | Metric | March 31, 2023 | December 31, 2022 | | :------------------------------------ | :------------- | :---------------- | | Duration (in years) | 3.6 | 3.6 | | Pre-tax yield (% of average investment portfolio assets) | 3.2% | 3.1% | [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows, capital structure, dividend restrictions, risk-to-capital ratio, and overall liquidity position [Cash Flows](index=53&type=section&id=Cash%20Flows) This section summarizes the company's cash flow activities from operations, investing, and financing Consolidated Cash Flows Summary | Metric | Three months ended March 31, 2023 (Thousands) | Three months ended March 31, 2022 (Thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $119,339 | $160,829 | | Net cash provided by (used in) investing activities | $33,463 | $(146,497) | | Net cash used in financing activities | $(44,956) | $0 | | Net increase in cash and cash equivalents | $107,846 | $14,332 | - Net cash from operating activities decreased due to timing of tax payments and lower unearned premium declines. Investing activities provided cash due to maturities and sales outpacing purchases. Financing activities included **$22.8 million** in dividends and **$22.2 million** in share repurchases in Q1 2023[201](index=201&type=chunk)[202](index=202&type=chunk) [Capital Resources and Financing Activities](index=53&type=section&id=Capital%20Resources%20and%20Financing%20Activities) This section outlines the company's debt obligations and available credit facilities - The company has **$750 million** of **6.5% Senior Notes** due in 2025 and an undrawn **$200 million** revolving credit facility, with compliance maintained for all financial covenants[203](index=203&type=chunk)[204](index=204&type=chunk) [Restrictions on the Payment of Dividends](index=53&type=section&id=Restrictions%20on%20the%20Payment%20of%20Dividends) This section details the regulatory and contractual limitations on the company's ability to pay dividends - Regulated insurance subsidiaries' ability to pay dividends is restricted by North Carolina insurance laws, requiring notice and potential approval from the Commissioner, with capacity to pay **$264 million** from unassigned surplus as of March 31, 2023[205](index=205&type=chunk)[206](index=206&type=chunk) - Minimum policyholder surplus (estimated at **$300 million**) and PMIERs compliance are key considerations for dividend strategies. EMICO completed a **$158 million** distribution in April 2023 to support capital return and financial flexibility[207](index=207&type=chunk)[208](index=208&type=chunk)[210](index=210&type=chunk) - The revolving credit agreement also imposes restrictions on EHI's cash dividends, requiring compliance with financial covenants and absence of default[212](index=212&type=chunk)[213](index=213&type=chunk) [Risk-to-Capital Ratio](index=55&type=section&id=Risk-to-Capital%20Ratio) This section defines and presents the company's risk-to-capital ratio for its insurance subsidiaries - The Risk-to-Capital (RTC) ratio is calculated as net RIF divided by policyholders' surplus plus statutory contingency reserve, with a maximum permitted ratio of **25:1** in most states[215](index=215&type=chunk)[216](index=216&type=chunk) Combined Insurance Subsidiaries RTC Ratio | Metric | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Statutory policyholders' surplus | $1,193 | $1,136 | | Contingency reserves | $3,679 | $3,551 | | Combined statutory capital | $4,872 | $4,687 | | Adjusted RIF | $61,546 | $60,061 | | Combined risk-to-capital ratio | 12.6 | 12.8 | EMICO RTC Ratio | Metric | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Statutory policyholders' surplus | $1,141 | $1,084 | | Contingency reserves | $3,675 | $3,548 | | EMICO statutory capital | $4,816 | $4,632 | | Adjusted RIF | $61,123 | $59,663 | | EMICO risk-to-capital ratio | 12.7 | 12.9 | [Liquidity](index=56&type=section&id=Liquidity) This section describes the company's liquidity position, including cash, investments, and credit facilities - As of March 31, 2023, the company maintained **$622 million** in cash and cash equivalents (up from **$514 million** at Dec 31, 2022) and held significant investment-grade fixed maturity securities and short-term investments for liquidity[218](index=218&type=chunk) - The **$200 million** revolving credit facility remained undrawn, providing additional liquidity. Operating cash flows from insurance premiums and net investment income are the primary sources of liquidity[218](index=218&type=chunk)[219](index=219&type=chunk) [Financial Strength Ratings](index=56&type=section&id=Financial%20Strength%20Ratings) This section lists the financial strength ratings and outlooks for the company's primary insurance subsidiary EMICO Financial Strength Ratings | Agency | Rating | Outlook | Action | Date of Rating | | :---------------------- | :----- | :------ | :------- | :------------- | | Moody's Investor Service, Inc. | A3 | Stable | Upgrade | March 1, 2023 | | Fitch Ratings, Inc. | A- | Stable | Upgrade | April 25, 2023 | | S&P Global Ratings | BBB+ | Stable | Upgrade | February 16, 2023 | [Contractual Obligations and Commitments](index=56&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms no material changes to contractual obligations or off-balance sheet arrangements - No material additions or changes to contractual obligations or off-balance sheet arrangements were reported compared to the prior year, other than potential future adjustments to loss reserves due to macroeconomic uncertainty and COVID-19 related forbearance/foreclosure delays[221](index=221&type=chunk) [Critical Accounting Estimates](index=57&type=section&id=Critical%20Accounting%20Estimates) This section states that there were no significant changes in critical accounting estimates from the prior Annual Report - There were no significant changes in critical accounting estimates from those discussed in the Annual Report as of the filing date[222](index=222&type=chunk) [New Accounting Standards](index=57&type=section&id=New%20Accounting%20Standards) This section refers to the notes to the financial statements for details on new accounting standards - Refer to Note 2 in the unaudited condensed consolidated financial statements for a discussion of recently adopted and not yet adopted accounting standards[223](index=223&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's market risk exposure from its investment portfolio, focusing on sensitivity to interest rates, credit quality, concentration, and prepayment risks - The investment portfolio is exposed to market risks, particularly sensitive to U.S. market fluctuations, including changes in interest rates, the term structure of interest rates, credit quality, concentration risk, and prepayment risk[225](index=225&type=chunk)[226](index=226&type=chunk) - Market risk is managed through defined investment policy guidelines and oversight. As of March 31, 2023, the effective duration of available-for-sale investments was **3.6 years**, implying a **3.6%** change in fair value for a **100 basis point** yield curve shift[225](index=225&type=chunk)[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023[229](index=229&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended March 31, 2023[230](index=230&type=chunk) [Part II. Other Information](index=58&type=section&id=Part%20II.%20Other%20Information) This part provides additional information, including legal proceedings, risk factors, recent sales of unregistered securities, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is not currently subject to any material legal proceedings - The company is not subject to any pending material legal proceedings[235](index=235&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K[236](index=236&type=chunk) [Item 2. Recent Sales of Unregistered Securities](index=60&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities) This section provides details on the company's share repurchase activities during the first quarter of 2023 Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased under Plans or Programs (Thousands) | | :------------------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------- | | January 1 - January 31, 2023 | 253,689 | $24.13 | 253,689 | $67,347 | | February 1 - February 28, 2023 | 440,339 | $24.35 | 440,339 | $56,627 | | March 1 - March 31, 2023 | 222,748 | $23.94 | 222,748 | $51,294 | | Total | 916,776 | $24.19 | 916,776 | $51,294 | - The company repurchased **916,776 shares** for an average price of **$24.19 per share** during Q1 2023 under its **$75 million** share repurchase program, with **$51.3 million** remaining available as of March 31, 2023[237](index=237&type=chunk) - Subsequent to quarter end, an additional **353,416 shares** were purchased through April 30, 2023, at an average price of **$23.73**[237](index=237&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section discloses a voluntary update regarding the amendment and restatement of the Master Agreement with Genworth Financial, Inc - The Master Agreement with Genworth Financial, Inc. was amended and restated on March 20, 2023, removing Genworth's approval of EHI's annual operating plan clause[238](index=238&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various agreements, certifications, and XBRL documents - The exhibits include the Amended and Restated Master Agreement, certifications of principal executive and financial officers, and Inline XBRL documents[240](index=240&type=chunk)

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) Enact is a leading U.S. private mortgage insurer, protecting lenders from low down payment loan losses through rigorous underwriting and CRT - Enact Holdings, Inc. is a leading private mortgage insurance company in the U.S. housing finance market since **1981**, operating in all **50 states** and **D.C.**[9](index=9&type=chunk) - The company's principal business is writing and assuming residential mortgage guaranty insurance, covering a portion of unpaid principal balance of Low Down Payment Loans to protect lenders and investors[10](index=10&type=chunk) Key Financial and Operational Data (2020-2022) | Metric | 2022 | 2021 | 2020 | | :----------------------- | :--------- | :--------- | :--------- | | New Insurance Written (NIW) | $66.5 billion | $97.0 billion | $99.9 billion | | Net Income | $704 million | $547 million | $370 million | | Adjusted Operating Income | $709 million | $551 million | $373 million | | PMIERs Sufficiency Ratio | 165% | - | - | | Insured Portfolio Covered by CRT | ~89% | - | - | - The company's strategy focuses on differentiating from competitors, maintaining **strong capital levels** and earnings, and delivering attractive risk-adjusted returns through robust underwriting, stress testing, and a diversified Credit Risk Transfer (CRT) program[17](index=17&type=chunk) [Overview](index=5&type=section&id=1.1%20Overview) Enact Holdings, Inc. is a leading private mortgage insurance company in the U.S. housing finance market since 1981 - Enact Holdings, Inc. is a leading private mortgage insurance company in the U.S. housing finance market since **1981**, operating in all **50 states** and **D.C.**[9](index=9&type=chunk) - The company's principal business is writing and assuming residential mortgage guaranty insurance, covering a portion of unpaid principal balance of Low Down Payment Loans to protect lenders and investors[10](index=10&type=chunk) Key Financial and Operational Data (2020-2022) | Metric | 2022 | 2021 | 2020 | | :----------------------- | :--------- | :--------- | :--------- | | New Insurance Written (NIW) | $66.5 billion | $97.0 billion | $99.9 billion | | Net Income | $704 million | $547 million | $370 million | | Adjusted Operating Income | $709 million | $551 million | $373 million | | PMIERs Sufficiency Ratio | 165% | - | - | | Insured Portfolio Covered by CRT | ~89% | - | - | [Corporate Information](index=5&type=section&id=1.2%20Corporate%20Information) Enact Holdings, Inc. became publicly traded in September 2021 and operates primarily through its subsidiary, EMICO - Enact Holdings, Inc. (EHI) was a wholly owned subsidiary of Genworth Financial, Inc. until its initial public offering (IPO) on **September 20, 2021**[13](index=13&type=chunk) - The IPO involved the issuance and sale of **13,310,400 shares** of common stock at **$19.00 per share**, with Genworth Holdings retaining all net proceeds[15](index=15&type=chunk) - The company operates primarily through Enact Mortgage Insurance Corporation (EMICO), an approved insurer by Fannie Mae and Freddie Mac, which was renamed from Genworth Mortgage Insurance Corporation in **February 2022**[16](index=16&type=chunk) [Our Strategy](index=6&type=section&id=1.3%20Our%20Strategy) The company's strategy focuses on differentiating from competitors, maintaining strong capital, and delivering attractive risk-adjusted returns - Differentiate Enact from competitors by delivering best-in-class underwriting and investing in efficiencies and decision-making - Maintain strong capital levels and earnings profile through robust underwriting, stress testing, conservative leverage, and a diversified Credit Risk Transfer (CRT) program - Deliver attractive risk-adjusted returns by writing profitable new business, leveraging proprietary risk assessment tools, and maximizing stockholder value through disciplined capital allocation[17](index=17&type=chunk) [Our Industry](index=7&type=section&id=1.4%20Our%20Industry) The U.S. mortgage market involves private and government-sponsored participants, with private mortgage insurance facilitating secondary market sales [United States Mortgage Market](index=7&type=section&id=1.4.1%20United%20States%20Mortgage%20Market) The U.S. residential mortgage market is one of the largest globally, involving primary and secondary market participants - The U.S. residential mortgage market is one of the largest globally, involving private and government-sponsored participants in both primary (originations) and secondary (mortgage-backed securities) markets[19](index=19&type=chunk) [GSEs](index=7&type=section&id=1.4.2%20GSEs) Fannie Mae and Freddie Mac (GSEs) require credit enhancement for Low Down Payment Loans, often through private mortgage insurance - Fannie Mae and Freddie Mac (GSEs) are major secondary mortgage market participants, requiring credit enhancement for Low Down Payment Loans, typically satisfied by private mortgage insurance[20](index=20&type=chunk) - GSEs maintain Private Mortgage Insurer Eligibility Requirements (PMIERs) for qualified insurers, which significantly influences the private mortgage insurance industry[20](index=20&type=chunk) [Private Mortgage Insurance](index=7&type=section&id=1.4.3%20Private%20Mortgage%20Insurance) Private mortgage insurance facilitates secondary market sales for Low Down Payment Loans, expanding financing access for homeowners - Private mortgage insurance facilitates secondary market sales for Low Down Payment Loans, increasing lending capacity and expanding financing access for homeowners, especially first-time buyers[21](index=21&type=chunk) - Mortgage insurance utilization is significantly higher for purchase originations than for refinances due to the higher prevalence of Low Down Payment Loans in purchases[24](index=24&type=chunk) [Competition](index=8&type=section&id=1.4.4%20Competition) Competition in the mortgage insurance industry comes from government agencies and other private insurers, based on pricing and service - Primary competitors include government agencies (FHA, VA) and other private mortgage insurers (Arch Capital, Essent, MGIC, NMI, Radian) - Competition is based on pricing, underwriting guidelines, customer relationships, service levels, financial strength, and technology - Government agencies often have less restrictive guidelines and flat pricing, attracting borrowers with lower FICO scores, while private insurers compete for higher FICO score borrowers[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Enact has maintained a **12.0% to 19.2% quarterly market share** of private mortgage insurance by per annum NIW since **2012**[27](index=27&type=chunk) [Our Products and Services](index=9&type=section&id=1.5%20Our%20Products%20and%20Services) Enact primarily offers primary mortgage insurance, with minor pool mortgage insurance and contract underwriting services [Primary Mortgage Insurance](index=9&type=section&id=1.5.1%20Primary%20Mortgage%20Insurance) Substantially all of Enact's policies are primary mortgage insurance, protecting individual loans at specified coverage percentages - Substantially all of Enact's policies are primary mortgage insurance, providing protection on individual loans at specified coverage percentages, typically **6% to 35%** of the underlying primary insurance in-force (IIF)[31](index=31&type=chunk)[32](index=32&type=chunk) - Premiums are generally calculated as a percentage of the original principal balance and can be paid monthly, as a single upfront payment, annually, or split - Coverage may be cancelled by the insured at any time or automatically terminated by lenders under certain LTV conditions (e.g., **78% LTV** under HOPA)[33](index=33&type=chunk)[34](index=34&type=chunk) [Pool Mortgage Insurance](index=9&type=section&id=1.5.2%20Pool%20Mortgage%20Insurance) Pool mortgage insurance covers a finite set of individual loans, often with deductibles, for additional credit enhancement - Pool mortgage insurance covers a finite set of individual loans, often with deductibles or stop-loss provisions, and is typically used for additional credit enhancement in secondary market transactions[35](index=35&type=chunk) - Currently, Enact has an insignificant amount of pool IIF, representing less than **0.2%** of total risk in-force (RIF)[36](index=36&type=chunk) [Contract Underwriting Services](index=10&type=section&id=1.5.3%20Contract%20Underwriting%20Services) Enact provides fee-based contract underwriting services, offering outsourced capacity and indemnifying against material underwriting errors - Enact provides fee-based contract underwriting services, offering outsourced capacity to customers and indemnifying them against losses from material errors in underwriting decisions, subject to contractual limitations[37](index=37&type=chunk) [Our Mortgage Insurance Portfolio](index=10&type=section&id=1.6%20Our%20Mortgage%20Insurance%20Portfolio) The majority of Enact's in-force exposures are primary insurance, with a diverse portfolio across states and MSAs - The majority of Enact's in-force exposures and all new insurance written (NIW) are primary insurance, with legacy books originated prior to **2009** representing **3%** of primary IIF and RIF as of **December 31, 2022**[38](index=38&type=chunk)[39](index=39&type=chunk) - Weighted average LTV of IIF as of **December 31, 2022**: **93%** - Weighted average LTV of NIW in **2022** and **2021**: **92%** - Weighted average FICO score of IIF as of **December 31, 2022**: **743** - Weighted average FICO score of NIW in **2022**: **748**; in **2021**: **746**[40](index=40&type=chunk) - The portfolio is diverse, with the largest state concentration in **California (12% of primary RIF)** and the largest MSA/MD in **Chicago-Naperville, IL (3% of primary RIF)** as of **December 31, 2022**[41](index=41&type=chunk) [Customers and Sales & Marketing](index=11&type=section&id=1.7%20Customers%20and%20Sales%20%26%20Marketing) Enact serves approximately 1,800 diversified mortgage lenders, focusing on strong customer relationships and technology - Enact serves approximately **1,800 diversified mortgage lenders** across the U.S., with the largest customer accounting for **18% of NIW** in **2022** and the top five for **30%**[43](index=43&type=chunk) - Sales and marketing efforts focus on building strong customer relationships through a dedicated sales force, digital marketing, and consulting services, supported by technology for easy quoting and ordering[45](index=45&type=chunk)[46](index=46&type=chunk)[49](index=49&type=chunk) - In **2019**, Enact launched EMIC-NC to insure residential mortgage loans not intended for GSE sale, providing greater flexibility and strategic optionality[47](index=47&type=chunk) [Risk Management and Operations](index=12&type=section&id=1.8%20Risk%20Management%20and%20Operations) Enact maintains a robust enterprise risk management framework, proprietary modeling, and rigorous policy acquisition processes [Risk Management and Oversight](index=12&type=section&id=1.8.1%20Risk%20Management%20and%20Oversight) Enact maintains a robust enterprise risk management framework, overseen by the Board's Risk Committee - Enact maintains a robust enterprise risk management framework, overseen by the Board's Risk Committee, covering credit, market, insurance, housing, operational, and IT risks[50](index=50&type=chunk)[51](index=51&type=chunk) [Modeling and Analytics](index=12&type=section&id=1.8.2%20Modeling%20and%20Analytics) A proprietary risk modeling platform evaluates returns and volatility, informing risk appetite, credit policy, and pricing - Proprietary risk modeling platform evaluates returns and volatility, assessing default probability, loss severity, prepayment, and expected volatility on each insured loan, informing risk appetite, credit policy, pricing, and CRT strategy[53](index=53&type=chunk) [Policy Acquisition and Quality Assurance](index=12&type=section&id=1.8.3%20Policy%20Acquisition%20and%20Quality%20Assurance) Customer qualification and policy acquisition follow strict guidelines, with independent quality assurance reviews - Customer qualification involves reviewing business and financial profiles, while policy acquisition requires loans to meet underwriting and eligibility guidelines, screened by a rules engine[54](index=54&type=chunk)[55](index=55&type=chunk) - An independent quality assurance function conducts pre- and post-closing underwriting reviews to identify adverse trends and ensure high-quality loan production[57](index=57&type=chunk) - Portfolio management involves regular monitoring of characteristics, performance, and concentrations across various metrics, with stress testing to identify risks[58](index=58&type=chunk) [Business Continuity](index=13&type=section&id=1.8.4%20Business%20Continuity) A robust business continuity program is regularly updated and tested, ensuring continuous service through remote work capabilities - A robust business continuity program, led by a crisis management leader, is updated and tested regularly, with all employees equipped for remote work to ensure continuous service[59](index=59&type=chunk) [Underwriting](index=13&type=section&id=1.8.5%20Underwriting) Underwriting guidelines require verified borrower capacity and collateral valuation, largely consistent with GSEs' automated systems - Underwriting guidelines require verified borrower capacity and willingness to pay, and well-supported collateral valuation, largely consistent with GSEs' automated systems[60](index=60&type=chunk)[61](index=61&type=chunk) - Enact uses a proprietary mortgage insurance underwriting system, significantly increasing underwriter productivity and allowing customized turn times[62](index=62&type=chunk)[63](index=63&type=chunk) - Non-Delegated Underwriting: Enact individually underwrites each application using its system and dispersed staff - Delegated Underwriting: Eligible lenders underwrite based on Enact's guidelines, with Enact performing quality assurance reviews. In **2022** and **2021**, delegated underwriting accounted for approximately **71%** and **65%** of NIW by loan count, respectively[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) [Pricing](index=14&type=section&id=1.8.6%20Pricing) Pricing is highly competitive, utilizing a proprietary risk-based engine to evaluate returns and volatility under capital frameworks - Pricing is highly competitive, with Enact using a proprietary risk-based pricing engine to evaluate returns and volatility under PMIERs and internal economic capital frameworks, allowing dynamic price adjustments[68](index=68&type=chunk)[69](index=69&type=chunk) [Credit Risk Transfer](index=14&type=section&id=1.8.7%20Credit%20Risk%20Transfer) Enact's CRT strategy reduces loss volatility and provides capital relief through traditional reinsurance and ILN transactions - Enact's CRT strategy reduces loss volatility and provides capital relief under PMIERs and state insurance capital requirements, enhancing return profile[70](index=70&type=chunk)[71](index=71&type=chunk) - CRT program distributes risk through traditional reinsurance (XOL coverage with highly rated reinsurers) and insurance-linked note (ILN) transactions with capital markets investors - Since **2015**, Enact executed **$4.6 billion** in CRT transactions, covering approximately **89% of RIF** as of **December 31, 2022** - CRT program provided an estimated aggregate of **$1.6 billion** of PMIERs capital credit and **$1.8 billion** of loss coverage as of **December 31, 2022**[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Delinquencies, Loss Management and Claims](index=15&type=section&id=1.8.8%20Delinquencies,%20Loss%20Management%20and%20Claims) Delinquencies are affected by economic factors, with loss mitigation efforts aiming to cure them and manage claims - Delinquencies are affected by factors like housing price appreciation/depreciation, unemployment, and interest rates, with loss mitigation efforts aiming to cure delinquencies and keep borrowers in their homes[75](index=75&type=chunk)[77](index=77&type=chunk) - Claims result from uncured delinquencies, with factors like LTV, property values, and employment levels affecting frequency and severity. Enact settled over half of **2022** and **2021** claims via third-party sale or acquisition options due to home price appreciation[78](index=78&type=chunk)[80](index=80&type=chunk) - Enact reviews loan and servicing files for claim validity, with the ability to reduce or deny claims for non-compliance or rescind coverage for fraud/material misrepresentation, though rescission rights are limited by master policies[81](index=81&type=chunk)[83](index=83&type=chunk) [Technology and Cybersecurity](index=17&type=section&id=1.9%20Technology%20and%20Cybersecurity) Enact invests in technology for operational excellence and customer experience, supported by a multi-layered cybersecurity program - Enact invests in technology for operational excellence and customer experience, including a proprietary underwriting platform, lender/servicer integration, and risk modeling - Ongoing enhancements focus on policy administration, pricing efficiency, customer integration, and leveraging AI/machine learning for risk and portfolio management - A multi-layered cybersecurity program, based on NIST 800-53, includes risk assessments, penetration testing, vulnerability scanning, and regular employee training, overseen by the Risk Committee of the Board[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) [Ratings](index=18&type=section&id=1.10%20Ratings) Financial strength ratings are crucial for competitive positioning, with EMICO rated 'BBB+' by S&P and Fitch, and 'Baa1' by Moody's - Financial strength ratings are crucial for competitive positioning and public confidence. As of **February 28, 2023**, EMICO was rated '**BBB+**' by S&P, '**Baa1**' by Moody's, and '**BBB+**' by Fitch[90](index=90&type=chunk) [Investment Portfolio](index=18&type=section&id=1.11%20Investment%20Portfolio) The investment portfolio, primarily fixed maturity assets, focuses on capital preservation, income generation, and liquidity - The investment portfolios of insurance subsidiaries are directed by the Enact Investment Committee, with Genworth as investment manager, while EHI's portfolio is managed by a third-party[91](index=91&type=chunk)[94](index=94&type=chunk) - As of **December 31, 2022**, the fair value of the investment portfolio was **$4.9 billion** in fixed maturity assets (**98% investment grade**) and **$514 million** in cash/cash equivalents[94](index=94&type=chunk) - Primary objectives are capital preservation, investment income generation, and liquidity maintenance, with strategies emphasizing fixed income, low volatility, and highly liquid assets[94](index=94&type=chunk) [Human Capital Management and Employees](index=19&type=section&id=1.12%20Human%20Capital%20Management%20and%20Employees) Enact employs 496 full-time employees, focusing on competitive compensation, professional development, and diversity - Enact employs **496 full-time employees** in the U.S. (**58% women, 25% people of color**) as of **December 31, 2022**, with **46%** in Raleigh and **54%** in the field[96](index=96&type=chunk) - Focus areas include competitive compensation and benefits, professional development, diversity & inclusion initiatives, and civic engagement - The company successfully implemented a hybrid work model in **March 2022** after operating remotely from **March 2020** due to COVID-19[97](index=97&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) [Regulation](index=20&type=section&id=1.13%20Regulation) Enact's insurance operations are extensively regulated by state laws, federal acts, and GSE requirements [General Insurance Regulation](index=20&type=section&id=1.13.1%20General%20Insurance%20Regulation) Enact's insurance operations are extensively regulated by state insurance laws, primarily to protect insureds - Enact's insurance operations are extensively regulated by state insurance laws, governing financial condition, business conduct, licensing, policy forms, and rates, primarily to protect insureds[103](index=103&type=chunk)[106](index=106&type=chunk) [Insurance Holding Company Regulation](index=21&type=section&id=1.13.2%20Insurance%20Holding%20Company%20Regulation) Certain insurance subsidiaries are subject to the Insurance Holding Company Act, regulating intercompany operations and dividends - Certain insurance subsidiaries are subject to the Insurance Holding Company Act in North Carolina, requiring reports on intercompany operations and transactions, and regulatory approval for certain transactions and changes of control[108](index=108&type=chunk)[109](index=109&type=chunk)[111](index=111&type=chunk) - Dividend payments from insurance subsidiaries to the holding company are regulated by domiciliary states, requiring notice and/or approval, with 'extraordinary' dividends having specific thresholds[112](index=112&type=chunk)[113](index=113&type=chunk) [NAIC and Examinations](index=22&type=section&id=1.13.3%20NAIC%20and%20Examinations) The NAIC promulgates model insurance laws and accounting guidance, and state departments conduct periodic examinations - The NAIC promulgates model insurance laws and accounting guidance (SAP) for states, and its changes can affect statutory capital and surplus[114](index=114&type=chunk) - The ORSA Model Act requires annual assessment of risk management and solvency, and state insurance departments conduct periodic examinations of insurers' books and practices[115](index=115&type=chunk)[117](index=117&type=chunk) [Accounting Principles and Market Conduct](index=23&type=section&id=1.13.4%20Accounting%20Principles%20and%20Market%20Conduct) Statutory Accounting Principles (SAP) monitor insurer solvency, while state laws govern market conduct activities - Statutory Accounting Principles (SAP) are used by state regulators to monitor insurer solvency, differing from U.S. GAAP in asset/liability valuation[118](index=118&type=chunk) - State insurance laws govern market conduct activities, including disclosure, advertising, and claims handling, enforced through market conduct examinations[119](index=119&type=chunk) [Capital and Surplus Requirements](index=23&type=section&id=1.13.5%20Capital%20and%20Surplus%20Requirements) Mortgage guaranty insurers face state capital requirements and must establish a statutory contingency reserve - Mortgage guaranty insurers are not subject to NAIC's RBC but some states impose capital requirements, such as a maximum RTC ratio of **25:1**[122](index=122&type=chunk) - The NAIC is considering revisions to the Mortgage Guaranty Insurance Model Act and developing a group capital calculation (GCC) tool for insurance holding company systems[124](index=124&type=chunk)[125](index=125&type=chunk) - Insurance subsidiaries must establish a statutory contingency reserve (at least **50%** of net earned premiums annually for **10 years**) to provide for losses during economic declines, limiting dividend payments until released[127](index=127&type=chunk) [Dodd-Frank Act and QM Rule](index=24&type=section&id=1.13.6%20Dodd-Frank%20Act%20and%20QM%20Rule) The Dodd-Frank Act introduced extensive changes, including ATR and QM rules, often requiring private mortgage insurance - The Dodd-Frank Act introduced extensive changes to financial services regulation, including the ability-to-repay (ATR) requirement and Qualified Mortgage (QM) rules, which often require private mortgage insurance[130](index=130&type=chunk)[131](index=131&type=chunk) - The CFPB amended the QM Rule, and GSEs now acquire loans meeting the new price-based (APOR) definition, with little expected impact on Enact as previous QM Patch loans are expected to still qualify[131](index=131&type=chunk) - SEC adopted rules for recovery of erroneously awarded compensation (clawback policies) and pay versus performance disclosure, effective for fiscal years ending after **December 16, 2022**[132](index=132&type=chunk)[134](index=134&type=chunk) [Agency Qualification Requirements (PMIERs)](index=26&type=section&id=1.13.7%20Agency%20Qualification%20Requirements%20(PMIERs)) GSEs impose PMIERs, setting operational and financial requirements for mortgage insurers to be eligible to insure loans - GSEs impose PMIERs, setting operational and financial requirements for mortgage insurers to be eligible to insure loans purchased by GSEs, including 'Available Assets' meeting 'Minimum Required Assets'[135](index=135&type=chunk)[136](index=136&type=chunk) PMIERs Financial Requirements (2021-2022) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------- | :------------------ | :------------------ | | Estimated Available Assets | $5,206 million | $5,077 million | | Net Required Assets | $3,156 million | $3,074 million | | Sufficiency Ratio | 165% | 165% | | Sufficiency Above Requirements | $2,050 million | $2,003 million | - GSE Restrictions, imposed in **September 2020**, require EMICO to maintain higher PMIERs Minimum Required Assets (**120% in 2022, 125% thereafter**) and EHI to retain specific liquidity until certain GSE Conditions are met[143](index=143&type=chunk) - EHI maintained requisite ratings for two consecutive quarters prior to end of **2022**, and Genworth believes it achieved financial metrics, expecting GSE Restrictions to be lifted upon confirmation[144](index=144&type=chunk) [Other Federal Regulations (RESPA, HOPA, FCRA, Fair Housing Act, Mortgage Servicing, Basel III, Privacy)](index=28&type=section&id=1.13.8%20Other%20Federal%20Regulations%20(RESPA,%20HOPA,%20FCRA,%20Fair%20Housing%20Act,%20Mortgage%20Servicing,%20Basel%20III,%20Privacy)) Various federal and state laws regulate mortgage services, consumer protection, and data privacy - RESPA prohibits payments for settlement service referrals and regulates fees - HOPA mandates automatic termination or cancellation of private mortgage insurance under certain LTV conditions - FCRA imposes restrictions on credit report use and requires adverse action notices - The Fair Housing Act prohibits discrimination in residential real estate transactions - CFPB Servicing Rules establish requirements for handling defaulted loans and loss mitigation, including foreclosure prohibitions - The CARES Act provided mortgage forbearance options during COVID-19, potentially delaying foreclosures - Basel III revisions, if implemented as drafted, could discourage mortgage insurance use by not lowering LTV ratios for capital purposes - Federal and state laws (e.g., GLB Act, FCRA, NYDFS cybersecurity regulation, CCPA) require protection of consumer financial information and data privacy, with increasing regulatory scrutiny on cybersecurity risks[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[157](index=157&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) [Available Information](index=33&type=section&id=1.14%20Available%20Information) Enact's SEC filings and corporate governance documents are available on its website and the SEC's website - Enact's SEC filings (**10-K, 10-Q, 8-K**) and corporate governance documents are available on its website (www.enactmi.com) and the SEC's website (www.sec.gov)[176](index=176&type=chunk)[178](index=178&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could materially affect Enact's business, operations, or financial condition - Inability to meet PMIERs, GSE Restrictions, or additional GSE requirements could lead to ineligibility to write new insurance on GSE-acquired loans - Deterioration in economic conditions, severe recession, or decline in home prices (driven by inflation) may adversely affect loss experience - COVID-19 has and could continue to adversely impact business, results of operations, and financial condition - Inaccurate models or variability in loss development compared to estimates could materially affect business - Competition within the mortgage insurance industry could result in market share loss, lower premiums, or wider credit guidelines - Changes to GSE charters or practices, including reduced use of mortgage insurance, could adversely affect business - Inability to maintain sufficient regulatory capital could lead to business restrictions or impact financial strength ratings - Risks related to the continuing relationship with Parent (Genworth), including significant influence and potential adverse effects from Parent's issues - Changes in tax laws could materially affect business, cash flows, and financial condition - Cybersecurity failures or data breaches could damage reputation and adversely affect business[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) [Unresolved Staff Comments](index=73&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - The company has no unresolved staff comments[375](index=375&type=chunk) [Properties](index=73&type=section&id=Item%202.%20Properties) Enact leases its headquarters in Raleigh, North Carolina, and a second office in Washington, D.C. - Headquarters: Raleigh, North Carolina (approx. **130,000 sq ft**), lease expires **December 31, 2027** - Second office: Washington, D.C. (approx. **2,022 sq ft**), lease expires **April 2026** - Current facilities are considered adequate for needs, with suitable additional space expected to be available if required[376](index=376&type=chunk) [Legal Proceedings](index=73&type=section&id=Item%203.%20Legal%20Proceedings) Enact Holdings, Inc. is not currently subject to any pending material legal proceedings - The company is not subject to any pending material legal proceedings[377](index=377&type=chunk) [Mine Safety Disclosures](index=73&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Enact Holdings, Inc - Mine Safety Disclosures are not applicable[377](index=377&type=chunk) Part II [Market for Common Equity, Stockholder Matters and Issuer Purchases](index=74&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Enact's common stock is listed on Nasdaq, with a share repurchase program and quarterly cash dividends initiated - Enact's common stock is listed on the Nasdaq Stock Market under the symbol '**ACT**'. As of **February 24, 2023**, there were **7 registered holders** of record[383](index=383&type=chunk) Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet be Purchased | | :-------------------------- | :----------------------- | :--------------------------- | :---------------------------------------------------------- | | November 1 - November 30, 2022 | 40,073 | $24.20 | $74,030 | | December 1 - December 31, 2022 | 23,498 | $23.94 | $73,468 | | **Total** | **63,571** | **$24.10** | **$73,468** | - On **November 1, 2022**, the Company authorized a share repurchase program of up to **$75 million**, with no expiration date[384](index=384&type=chunk) - Initiated a quarterly cash dividend program in **Q1 2022**, paying **$0.14 per share** in Q2, Q3, and Q4 2022 - Paid a special cash dividend of **$1.12 per share** in **Q4 2022**[388](index=388&type=chunk) [Reserved](index=74&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=74&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Enact's financial condition and results, covering business overview, key factors, and accounting estimates [Overview of Business](index=76&type=section&id=7.1%20Overview%20of%20Business) Enact is a leading private mortgage insurance company providing credit protection, generating revenue through premiums and investment income - Enact is a leading private mortgage insurance company providing credit protection to mortgage lenders for Low Down Payment Loans, generating revenue through premiums and investment income[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk) - The company utilizes a Credit Risk Transfer (CRT) program to de-risk its operating model, spread loss risk, and provide capital relief, ceding a portion of premiums to reinsurers and ILN investors[393](index=393&type=chunk) - Profits are generated from premiums and investment income, less losses, operating expenses, interest, and taxes. Incurred losses are estimates of future claims on delinquent loans, influenced by macroeconomic conditions and borrower credit quality[394](index=394&type=chunk) [Key Factors Affecting Our Results](index=77&type=section&id=7.2%20Key%20Factors%20Affecting%20Our%20Results) Results are influenced by mortgage origination, market penetration, competition, seasonality, and credit quality - Mortgage Origination Volume: Driven by economic growth, unemployment, interest rates, home affordability, and legislative/regulatory actions - Penetration: Influenced by competitiveness against government agencies (FHA, VA), portfolio lenders, and capital market transactions - Competition and Market Share: Highly competitive, based on pricing, underwriting, customer relationships, financial strength, and technology. Enact uses a proprietary risk-based pricing engine - Seasonality: Purchase originations typically peak in Q2/Q3, while refinancing is interest-rate driven. Delinquency performance is generally favorable in Q1/Q2 - New Insurance Written (NIW): Increases IIF and premiums, affected by market size, penetration, and market share - Pricing: Strategy to set premium rates commensurate with underlying risk, using a flexible, granular, and analytical proprietary platform - Insurance In-Force (IIF): Primary driver of future earned premiums; affected by NIW and persistency rate - Persistency Rate and Business Mix: Higher persistency increases IIF and monthly premiums; lower persistency (due to prepayments/refinancing) reduces IIF. Single premium policies become more profitable with lower persistency - Credit Quality: Improved over time due to analytics, controls, and QM Rule, with strong FICO scores for NIW - Net Investment Income: Determined by invested assets and average portfolio yield - Net Investment Gains (Losses): Varies significantly based on market opportunities and capital profile - Losses Incurred: Current payments and changes in estimated future claims from delinquent loans, influenced by economic conditions, housing values, credit characteristics, and reinsurance - Credit Risk Transfer (CRT): Reduces volatility and provides capital relief by transferring risk to third parties[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)[403](index=403&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk)[411](index=411&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk)[416](index=416&type=chunk)[417](index=417&type=chunk) Seasonality of NIW, Cures, and New Delinquencies (2021-2022) | Metric (Amounts in millions) | Mar 31, 2021 | Jun 30, 2021 | Sep 30, 2021 | Dec 31, 2021 | Mar 31, 2022 | Jun 30, 2022 | Sep 30, 2022 | Dec 31, 2022 | | :------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | NIW | $24,934 | $26,657 | $23,972 | $21,441 | $18,823 | $17,448 | $15,069 | $15,145 | | % Change | (7.7)% | 6.9% | (10.1)% | (10.6)% | (12.2)% | (7.3)% | (13.6)% | 0.5% | | Cure Counts | 13,478 | 14,473 | 11,746 | 11,929 | 10,860 | 10,806 | 9,588 | 9,024 | | % Change | (18.6)% | 7.4% | (18.8)% | 1.6% | (9.0)% | (0.5)% | (11.3)% | (5.9)% | | New Delinquency Count | 10,053 | 6,862 | 7,427 | 8,282 | 8,724 | 7,847 | 9,121 | 10,304 | | % Change | (15.7)% | (31.7)% | 8.2% | 11.5% | 5.3% | (10.1)% | 16.2% | 13.0% | Weighted Average Mortgage Interest Rate on Outstanding Primary IIF (as of Dec 31, 2022) | Policy Year | Weighted Average Rate | | :---------------- | :-------------------- | | 2008 and prior | 5.70 % | | 2009 to 2014 | 4.45 % | | 2015 | 4.20 % | | 2016 | 3.91 % | | 2017 | 4.28 % | | 2018 | 4.81 % | | 2019 | 4.24 % | | 2020 | 3.26 % | | 2021 | 3.10 % | | 2022 | 4.88 % | | **Total portfolio** | **3.84 %** | [Critical Accounting Estimates](index=81&type=section&id=7.3%20Critical%20Accounting%20Estimates) Key estimates include loss reserves, investment valuation, allowance for credit losses, and revenue recognition, subject to significant judgment - Loss Reserves: Estimated for reported and IBNR defaults based on claim rates and severity using actuarial techniques. Subject to significant judgment and uncertainty from internal and external factors (e.g., home prices, unemployment, government policies) - Investments Valuation: Fixed maturity securities are valued at fair value using industry-standard pricing methodologies and market observable inputs. Subject to changes in interest rates, macroeconomic conditions, and credit spreads - Allowance for Credit Losses on Available-For-Sale Securities: Evaluated for unrealized losses to determine if they are credit-related, with an allowance recorded if expected cash flows are less than amortized cost. No allowance recorded as of **December 31, 2022** - Revenue Recognition: Recurring premiums recognized pro-rata; single/annual premiums deferred and earned over policy life. Subject to variations in cancellation rates and projected losses[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk)[424](index=424&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk)[427](index=427&type=chunk)[429](index=429&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk) Loss Reserves (2021-2022) | Metric | December 31, 2022 | December 31, 2021 | | :---------------- | :------------------ | :------------------ | | Loss Reserves | $519 million | $641 million | | Decrease | $122 million | - | [Trends and Conditions](index=84&type=section&id=7.4%20Trends%20and%20Conditions) Economic volatility, mortgage market decline, unemployment, and regulatory changes significantly impact Enact's performance and outlook - Economic Volatility: Continued high inflation, geopolitical uncertainty, and supply chain disruption in **2022**. Federal Reserve's aggressive interest rate hikes to combat inflation led to increased market volatility and higher rates - Mortgage Market Decline: Mortgage origination activity declined in **2022** due to rising rates, impacting refinance and purchase markets. Housing affordability challenged by high rates and elevated home prices - Unemployment: Declined to **3.5%** in **December 2022**, in line with pre-COVID-19 levels - Forbearance Plans: Servicer-reported forbearances generally declined, with ~**1.5%** of active primary policies in forbearance as of **Dec 31, 2022**. Uncertainty remains regarding resolution of COVID-19 related delinquencies - Delinquencies: Total delinquencies decreased in **2022** as cures outpaced new delinquencies. Annual new delinquency rate for **2022** was **3.8%**, slightly up from **2021** but in line with historical pre-COVID-19 levels - FHFA Initiatives: Focused on increasing homeownership accessibility and affordability, including Equitable Housing Finance Plans and changes to guarantee fee pricing. New upfront fees for high-balance and second-home loans effective **April 2022**. FHFA announced additional updates to upfront fee structure and recalibration of pricing matrix effective **May 2023** - FHA Premium Reduction: Department of Housing and Urban Development announced a **30-basis point reduction** of FHA annual insurance premium, expected to negatively impact the private mortgage insurance market, partially offset by FHFA pricing changes - Market Share: Enact manages new business quality through pricing and underwriting, seeing market conditions within its risk-adjusted return appetite - New Insurance Written (NIW): Decreased **31%** in **2022** to **$66.5 billion**, primarily due to a smaller private mortgage insurance market impacted by rising interest rates - Persistency Rate: Primary persistency rate increased to **80%** in **2022** (from **62%** in **2021**) due to the rising rate environment, slowing earned premium recognition from single premium policies and DAC amortization - Net Earned Premiums: Declined in **2022** due to lapse of older, higher-priced policies and fewer single premium cancellations, partially offset by IIF growth - Loss Ratio: (**10%**) in **2022** vs. **13%** in **2021**, largely from favorable reserve adjustments related to COVID-19 delinquencies. Reserve strengthening of **$46 million** on **Q4 2022** new delinquencies due to economic uncertainty - Risk-to-Capital Ratio: EMICO's RTC ratio was **12.9:1** as of **Dec 31, 2022** (vs. **12.3:1** in **2021**), remaining below NCDOI's maximum of **25:1** - PMIERs Compliance: Met all reporting requirements. Sufficiency ratio of **165%** as of **Dec 31, 2022** and **2021**, above GSE Restrictions (**120% in 2022**). PMIERs required assets benefited from a **0.30 multiplier** for certain non-performing loans - GSE Restrictions: EHI maintained requisite ratings and Genworth believes it achieved financial metrics for two consecutive quarters, expecting GSE Restrictions to be lifted upon confirmation - Reinsurance Transactions: Executed XOL reinsurance transactions in **2022** for current and expected NIW and existing policies, providing coverage - Revolving Credit Facility: Entered into a five-year, unsecured **$200 million facility** in **June 2022**, undrawn as of **Dec 31, 2022**, for working capital and general corporate purposes - Capital Return: Approved a quarterly cash dividend program in **April 2022 ($0.14/share)** and a special cash dividend (**$1.12/share**) in **Q4 2022**. Initiated a **$75 million** share repurchase program in **Q4 2022**[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk)[438](index=438&type=chunk)[439](index=439&type=chunk)[440](index=440&type=chunk)[443](index=443&type=chunk)[444](index=444&type=chunk)[445](index=445&type=chunk)[446](index=446&type=chunk)[447](index=447&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk)[450](index=450&type=chunk)[451](index=451&type=chunk)[452](index=452&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk)[459](index=459&type=chunk)[460](index=460&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk)[473](index=473&type=chunk)[474](index=474&type=chunk) [Results of Operations and Key Metrics](index=90&type=section&id=7.5%20Results%20of%20Operations%20and%20Key%20Metrics) This section details consolidated financial results, including revenues, expenses, net income, and key operational metrics Consolidated Results of Operations (2020-2022) | Metric (Amounts in thousands) | 2022 | 2021 | 2020 | 2022 vs. 2021 Change (%) | 2021 vs. 2020 Change (%) | | :--------------------------------------- | :--------- | :--------- | :--------- | :----------------------- | :----------------------- | | Revenues: | | | | | | | Premiums | $939,462 | $974,949 | $971,365 | (4)% | — % | | Net investment income | $155,311 | $141,189 | $132,843 | 10 % | 6 % | | Net investment gains (losses) | $(2,036) | $(2,124) | $(3,324) | (4)% | (36)% | | Other income | $2,309 | $3,841 | $5,575 | (40)% | (31)% | | **Total revenues** | **$1,095,046** | **$1,117,855** | **$1,106,459** | **(2)%** | **1 %** | | Losses and expenses: | | | | | | | Losses incurred | $(94,221) | $125,473 | $379,834 | (175)% | (67)% | | Acquisition and operating expenses, net of deferrals | $226,941 | $231,453 | $215,024 | (2)% | 8 % | | Amortization of deferred acquisition costs and intangibles | $12,405 | $14,704 | $20,939 | (16)% | (30)% | | Interest expense | $51,699 | $51,009 | $18,244 | 1 % | 180 % | | **Total losses and expenses** | **$196,824** | **$422,639** | **$634,041** | **(53)%** | **(33)%** | | Income before income taxes | $898,222 | $695,216 | $472,418 | 29 % | 47 % | | Provision for income taxes | $194,065 | $148,531 | $101,997 | 31 % | 46 % | | **Net income** | **$704,157** | **$546,685** | **$370,421** | **29 %** | **48 %** | | Loss ratio | (10)% | 13 % | 39 % | | | | Expense ratio | 25 % | 25 % | 24 % | | | - Premiums decreased in **2022** due to lapse of older, higher-priced policies and lower single premium cancellations, partially offset by higher IIF - Net investment income increased by **10%** in **2022** due to higher investment yields from interest rate increases and higher average invested assets - Losses incurred decreased significantly by **175%** in **2022**, primarily from favorable reserve adjustments related to COVID-19 delinquencies from prior years - Adjusted operating income increased in **2022** due to larger favorable reserve adjustments - NIW decreased **31%** in **2022** to **$66.5 billion** due to a smaller private mortgage insurance market from rising mortgage rates - Primary persistency rate increased to **80%** in **2022** (from **62%** in **2021**) due to the rising rate environment - Primary IIF grew by **10%** in **2022** to **$248.3 billion**, driven by increased persistency despite slower NIW production - Delinquent loans count decreased to **19,943** in **2022** from **24,820** in **2021**, with the delinquency rate falling to **2.08%** from **2.65%** - Average primary mortgage insurance claim severity was **94%** in **2022**, down from **103%** in **2021**, impacted by low claim volumes and home price appreciation[477](index=477&type=chunk)[478](index=478&type=chunk)[479](index=479&type=chunk)[487](index=487&type=chunk)[490](index=490&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk)[506](index=506&type=chunk)[511](index=511&type=chunk) [Liquidity and Capital Resources](index=108&type=section&id=7.6%20Liquidity%20and%20Capital%20Resources) Enact's liquidity and capital are managed through cash flows, debt, dividends, share repurchases, and regulatory compliance Consolidated Cash Flows (2020-2022) | Metric (Amounts in thousands) | 2022 | 2021 | 2020 | | :--------------------------------------- | :--------- | :--------- | :--------- | | Net cash provided by (used in) operating activities | $560,510 | $572,110 | $704,350 | | Net cash provided by (used in) investing activities | $(220,255) | $(398,782) | $(1,136,912) | | Net cash provided by (used in) financing activities | $(252,308) | $(200,294) | $300,298 | | Net increase (decrease) in cash and cash equivalents | $87,947 | $(26,966) | $(132,264) | - Operating cash flows decreased in **2022** due to lower premiums[533](index=533&type=chunk) - Investing activities resulted in cash outflows in **2022** and **2021** due to fixed maturity security purchases[534](index=534&type=chunk) - Financing activities in **2022** reflect dividends paid (**$250.8 million**) and share repurchases (**$1.5 million**)[535](index=535&type=chunk) - Issued **$750 million** in **6.5% Senior Notes** due **2025** in **August 2020**. GSE Restrictions require retaining **$300 million** of proceeds for debt service or EMICO capital needs, with **$203 million** remaining as of **Dec 31, 2022**[536](index=536&type=chunk)[537](index=537&type=chunk)[538](index=538&type=chunk)[539](index=539&type=chunk)[540](index=540&type=chunk)[541](index=541&type=chunk)[542](index=542&type=chunk) - Entered into a **$200 million** unsecured revolving credit facility in **June 2022**, undrawn as of **Dec 31, 2022**, for working capital and general corporate purposes[543](index=543&type=chunk)[544](index=544&type=chunk) - Insurance subsidiaries' ability to pay dividends is restricted by North Carolina insurance laws and PMIERs. As of **Dec 31, 2022**, capacity to pay **$292 million** from unassigned surplus with **30-day notice**[545](index=545&type=chunk)[546](index=546&type=chunk)[547](index=547&type=chunk) - EMICO's risk-to-capital ratio was **12.9:1** as of **Dec 31, 2022**, below the NCDOI's maximum of **25:1**[549](index=549&type=chunk)[550](index=550&type=chunk) - Maintained **$514 million** in cash and cash equivalents as of **Dec 31, 2022**, and significant investment-grade fixed maturity securities for liquidity[551](index=551&type=chunk)[552](index=552&type=chunk)[554](index=554&type=chunk) [Financial Strength Ratings](index=112&type=section&id=7.7%20Financial%20Strength%20Ratings) Financial strength ratings are crucial for competitive position, with EMICO's ratings recently upgraded or affirmed by major agencies - Financial strength ratings are crucial for competitive position and public confidence. EMICO's ratings were upgraded by Moody's (to **Baa1**) in **July 2022** and S&P (to **BBB+**) in **February 2023**, with Fitch affirming **BBB+** in **April 2022**[555](index=555&type=chunk)[556](index=556&type=chunk) EMICO Financial Strength Ratings (as of Feb 28, 2023) | Name of Agency | Rating | Outlook | Change Date of Rating | | :-------------------------- | :----- | :------ | :-------------------- | | Moody's Investor Service, Inc. | Baa1 | Stable | July 21, 2022 | | Fitch Ratings, Inc. | BBB+ | Stable | April 27, 2022 | | S&P Global Ratings | BBB+ | Stable | February 16, 2023 | [Quantitative and Qualitative Disclosures About Market Risk](index=112&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Enact's investment portfolio is exposed to market risks, primarily interest rate risk, credit risk, and concentration risk. The company manages these risks through defined investment policy guidelines, focusing on highly rated fixed income securities and matching maturities with expected liabilities. As of December 31, 2022, the effective duration of available-for-sale investments was 3.6 years, indicating sensitivity to yield curve shifts - Market risk exposure is managed through defined investment policy guidelines, with oversight from the Board and senior management - Key market risk drivers monitored include changes to interest rate levels and term structure, market volatility/credit quality, concentration risk, and prepayment risk - Credit risk is managed by analyzing issuers, transaction structures, collateral, and diversification - Interest rate risk is mitigated by a buy-and-hold investment philosophy, matching fixed income maturities with expected liability cash flows[560](index=560&type=chunk)[561](index=561&type=chunk)[562](index=562&type=chunk) - As of **December 31, 2022**, the effective duration of available-for-sale investments was **3.6 years**, meaning a **100 basis point shift** in the yield curve would result in a **3.6% change** in fair value[563](index=563&type=chunk) [Financial Statements and Supplementary Data](index=114&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the audited consolidated financial statements of Enact Holdings, Inc. and its subsidiaries for the years ended December 31, 2022, 2021, and 2020, along with related notes and supplementary schedules. The financial statements are prepared in conformity with U.S. GAAP and include the Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Changes in Equity, and Cash Flows, as well as the Report of Independent Registered Public Accounting Firm - Audited Consolidated Financial Statements for years ended **December 31, 2022, 2021, and 2020** are included - Statements comprise Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Changes in Equity, and Cash Flows - Includes Notes to Consolidated Financial Statements and Supplementary Schedules I (Summary of Investments) and II (Parent Company Only Financial Statements) - KPMG LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[565](index=565&type=chunk)[566](index=566&type=chunk)[568](index=568&type=chunk)[569](index=569&type=chunk) - The assessment of the valuation of loss reserves was identified as a critical audit matter due to inherent uncertainty and significant management judgment in claim severity and claim rate assumptions[573](index=573&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=168&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[825](index=825&type=chunk) [Controls and Procedures](index=168&type=section&id=Item%209A.%20Controls%20and%20Procedures) Enact's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022. Management also assessed and concluded that internal control over financial reporting was effective based on the COSO framework. No material changes in internal control over financial reporting were identified during the fiscal quarter ended December 31, 2022 - Disclosure controls and procedures were evaluated and concluded to be effective as of **December 31, 2022**[826](index=826&type=chunk) - Management concluded that internal control over financial reporting was effective as of **December 31, 2022**, based on the COSO framework[828](index=828&type=chunk) - No material changes in internal control over financial reporting were identified during the fiscal quarter ended **December 31, 2022**[829](index=829&type=chunk) - KPMG LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[831](index=831&type=chunk) [Other Information](index=171&type=section&id=Item%209B.%20Other%20Information) The Master Agreement between Genworth Financial, Inc. and Enact Holdings, Inc. was amended on February 23, 2023, to remove the requirement for Genworth's consent in electing, appointing, hiring, dismissing, or removing Enact's CEO - The Master Agreement between Genworth Financial, Inc. and Enact Holdings, Inc. was amended on **February 23, 2023**, to remove the requirement for Genworth's consent in CEO-related decisions[838](index=838&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=171&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Enact Holdings, Inc - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[838](index=838&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=173&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item, pertaining to directors, executive officers, and corporate governance, is incorporated by reference from the company's definitive proxy statement, which will be filed within 120 days after the fiscal year-end - Information for this item is incorporated by reference from the definitive proxy statement[840](index=840&type=chunk) [Executive Compensation](index=173&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item, concerning executive compensation, is incorporated by reference from the company's definitive proxy statement, which will be filed within 120 days after the fiscal year-end - Information for this item is incorporated by reference from the definitive proxy statement[841](index=841&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=173&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item, regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's definitive proxy statement, which will be filed within 120 days after the fiscal year-end - Information for this item is incorporated by reference from the definitive proxy statement[842](index=842&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=173&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) The information required for this item, pertaining to certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive proxy statement, which will be filed within 120 days after the fiscal year-end - Information for this item is incorporated by reference from the definitive proxy statement[843](index=843&type=chunk) [Principal Accounting Fees and Services](index=173&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item, concerning principal accounting fees and services, is incorporated by reference from the company's definitive proxy statement, which will be filed within 120 days after the fiscal year-end - Information for this item is incorporated by reference from the definitive proxy statement[844](index=844&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=173&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed as part of the 10-K report - Lists financial statements, financial statement schedules, and various exhibits, including corporate documents, agreements, and certifications[846](index=846&type=chunk)[847](index=847&type=chunk)[849](index=849&type=chunk) [Form 10–K Summary](index=175&type=section&id=Item%2016.%20Form%2010%E2%80%93K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[850](index=850&type=chunk)

Financial Data and Key Metrics Changes - The company reported a record net income of $704 million for the full year 2022, which translates to $4.31 per diluted share, marking a 28% increase from the previous year [7][21] - Return on equity for the full year was 14%, consistent with strong performance metrics [7][21] - For Q4 2022, GAAP net income was $144 million or $0.88 per diluted share, down from $0.94 per diluted share in the same period last year [21] Business Line Data and Key Metrics Changes - New insurance written (NIW) for Q4 2022 was $15 billion, consistent with Q3 2022 but down 32% year-over-year due to lower mortgage originations [22] - Insurance in-force reached a record $248 billion, driven by a combination of $66 billion of new insurance written and increased persistency [23] - Persistency improved to 86% in Q4 2022, up from 82% in Q3 2022 and 69% in Q4 2021 [23] Market Data and Key Metrics Changes - The pricing environment remained constructive, with an increase in industry pricing and several price increases implemented on new business [12] - The overall credit risk profile of new insurance written remains strong, with loans underwritten to prudent market standards [22] Company Strategy and Development Direction - The company aims to maintain financial strength and flexibility while executing a cycle-tested growth and risk management strategy [8][17] - Investments in technology-driven tools and solutions have differentiated the company's platform and enhanced decision-making [7][8] - The company is focused on disciplined cost management, targeting expense levels in 2023 below those of 2022 [10][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term foundational strength of the mortgage insurance industry despite near-term uncertainties [16][17] - The company is well-positioned for 2023 and beyond, with a resilient portfolio and strong balance sheet [15][36] - Management highlighted the importance of monitoring macroeconomic factors, particularly unemployment, as they could impact future credit performance [62] Other Important Information - The company returned over $250 million to shareholders in 2022 through dividends and share repurchase programs [11][34] - The PMIERs sufficiency remained strong at 165%, providing a buffer above the published requirements [33] Q&A Session Summary Question: Discussion on PMIERs extra charge and capital return - Management indicated that lifting PMIERs restrictions would enhance financial flexibility but would not lead to a significant release of capital [39][40] Question: Details on the seasoned NIW transaction - The one-time seasoned transaction involved a portfolio with high LTV loans, won due to strong relationships and capital strength [44][46] Question: Trends in new delinquencies - Management noted that credit performance remains strong, with new delinquencies expected to be influenced by macroeconomic conditions, particularly unemployment [62]

Call Start: 08:00 January 1, 0000 8:46 AM ET Enact Holdings, Inc. (NASDAQ:ACT) Q3 2022 Earnings Conference Call November 2, 2022 08:00 ET Company Participants Daniel Kohl - Vice President of Investor Relations Rohit Gupta - President & Chief Executive Officer Dean Mitchell - Chief Financial Officer & Treasurer Conference Call Participants Mihir Bhatia - Bank of America Bose George - KBW Geoffrey Dunn - Dowling & Partners Operator Good morning and welcome to the Enact's Third Quarter Earnings Call. Please be ...

Enact Holdings, Inc. (NASDAQ:ACT) Q2 2022 Earnings Conference Call August 2, 2022 8:00 AM ET Company Participants Daniel Kohl – Vice President of Investor Relations Rohit Gupta – President and Chief Executive Officer Dean Mitchell – Chief Financial Officer and Treasurer Conference Call Participants Mihir Bhatia – Bank of America John Kilichowski – Credit Suisse Tommy McJoynt – KBW Geoffrey Dunn – Dowling & Partners Rick Shane – JPMorgan Ryan Gilbert – BTIG Operator Good morning, and welcome to the Enact Sec ...