Enact (ACT)2025-02-28 21:02Financial Performance and Capital Management - The company may require additional capital to support growth and meet regulatory requirements, which could adversely affect its financial condition if not raised in a timely manner [218]. - The company’s ability to raise additional capital may be limited by Genworth's ownership of at least 80% of its common stock, affecting future capital-raising efforts [219]. - The company's liquidity and capital position are highly dependent on the performance of its subsidiaries and their ability to pay dividends and distributions [293]. - The payment of dividends by the company's insurance subsidiaries is subject to regulatory approval and may be restricted based on their financial condition and operating performance [292]. - Future dividend payments and share repurchase authorizations are subject to review and approval by the Board of Directors [312]. - The ability to return capital to shareholders is dependent on business results and the macroeconomic environment [312]. - Future capital returns may be materially affected by various risk factors [312]. - Genworth's ownership of at least 80% of common stock may limit the company's ability to raise additional capital [312]. - There is no assurance that the company will maintain current levels of dividends or share repurchases in the future [312]. - The company's ability to repurchase stock may be restricted by limited public float [312]. - Future returns of capital must comply with debt agreements and applicable laws [312]. - Any changes in capital return strategies could materially affect the market price of common stock [312]. Regulatory and Compliance Risks - The company is subject to extensive regulation, and changes in regulation may reduce profitability and limit growth, impacting the ability to conduct business [245][246]. - The statutory capital adequacy ratio for U.S. mortgage insurers, known as the RTC ratio, is critical for maintaining business operations and compliance with regulatory requirements [252]. - Regulatory scrutiny related to risk-based pricing systems and the use of algorithms may increase, potentially affecting premium rates and underwriting practices [249]. - The company is subject to various federal and state consumer protection and insurance laws, which could materially adversely affect its business if changes occur [262]. - The Dodd-Frank Act requires originators to retain a specified percentage of credit risk exposure on securitized mortgages that do not meet the definition of a Qualified Residential Mortgage (QRM) [263]. - In July 2023, proposed changes to the Basel III Endgame rule could eliminate the 50% capital relief for high loan-to-value portfolio loans with mortgage insurance for banks with total assets greater than $100 billion, potentially decreasing demand for mortgage insurance [266]. Market and Economic Conditions - A decline in economic conditions or adverse population trends could negatively affect the housing market and, consequently, the demand for mortgage insurance [240]. - Changes in government housing policy and increased competition from federal agencies like FHA and VA could reduce demand for private mortgage insurance [259]. - The FHFA's Enterprise Capital Framework may lead to increased guarantee pricing by GSEs, negatively impacting the private mortgage insurance market [261]. - A decrease in the volume of Low Down Payment Loan originations could lead to a decline in revenue, as the company primarily provides mortgage insurance for these loans [237]. Investment and Financial Risks - The company faces significant unrealized losses in its investment portfolio due to elevated interest rates, impacting future earnings [217]. - The company’s investment portfolio is predominantly limited to highly rated fixed maturity securities, but rising interest rates have led to significant unrealized losses [227]. - The company’s mortgage insurance premiums may not adequately compensate for risks, potentially leading to adverse financial effects [236]. Operational Risks - The company relies on third-party servicers for loan servicing, and disruptions in their operations could increase losses and impact financial performance [230]. - The company relies on third-party vendors for unique products and services, and any failure by these vendors could adversely affect its operations [298]. - The company is exposed to risks from natural or man-made disasters, which could disrupt operations and lead to increased delinquency rates among borrowers [307]. - The company must continuously invest in technology to remain competitive, and failure to enhance its platform could negatively impact its business [302]. Cybersecurity and Reputational Risks - The company has experienced occasional cybersecurity incidents, which, if significant, could damage reputation and result in regulatory fines or legal costs [243][244]. - The company retains confidential customer information, and any failure to protect this data could result in significant costs and damage to reputation [243]. - The company may face reputational harm if Genworth or its subsidiaries experience litigation or damage to their reputation, which could adversely affect its business [277]. - The company faces risks related to litigation and regulatory proceedings, which could result in financial losses and harm its reputation [295]. Shareholder and Corporate Governance - Genworth beneficially owns at least 80% of the company's common stock, which allows it to control significant corporate decisions, potentially delaying or deterring actions favored by other stockholders [268]. - The company is currently a member of the Genworth Consolidated Group, which requires Genworth to own at least 80% of the total voting power of the company's stock [287]. - If the company ceases to be a member of the Genworth Consolidated Group, it may face increased income tax obligations due to the application of "unified loss rules" [288]. - The company does not expect a material reduction in the tax basis of its assets if it departs from the Genworth Consolidated Group, but there are no guarantees regarding future tax obligations [289]. Dividend and Stock Repurchase Activities - The company initiated a quarterly dividend for common shareholders in 2022 [312]. - The first Stock Repurchase Plan was announced, allowing for repurchases of common stock [312].