Enact (ACT) - 2024 Q2 - Quarterly Results

Enact Q2 2024 Earnings Release Financial and Operating Highlights Enact reported a strong second quarter of 2024, with GAAP Net Income of $184 million and Adjusted Operating Income of $201 million, achieving a record primary insurance-in-force of $266 billion driven by market execution Key Financial and Operating Metrics | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | GAAP Net Income ($) | $184 million | $161 million | $168 million | | Diluted EPS ($) | $1.16 | $1.01 | $1.04 | | Adjusted Operating Income ($) | $201 million | $166 million | $178 million | | Adj. Diluted Operating EPS ($) | $1.27 | $1.04 | $1.10 | | Primary Insurance-in-Force ($) | $266 billion | $264 billion | $258 billion | | Loss Ratio (%) | (7)% | 8% | (2)% | | Return on Equity (%) | 15.4% | 13.8% | 15.5% | | PMIERs Sufficiency (%) | 169% | 163% | 162% | - The CEO highlighted a very strong Q2 performance, emphasizing record insurance-in-force, prudent risk management, expense discipline, and capital return to shareholders amidst a dynamic market[2] Performance Summary The company demonstrated improved profitability and premium growth, driven by favorable loss experience and increased new insurance written - Net income increased to $184 million, up from $161 million in Q1 2024 and $168 million in Q2 2023[4] - Adjusted operating income also rose to $201 million, compared to $166 million in the prior quarter and $178 million in the prior year's quarter[4] - New insurance written (NIW) was $14 billion, a 29% increase from Q1 2024 due to a higher estimated MI market size, but down 10% from Q2 2023[4] - Losses incurred were a benefit of $(17) million, resulting in a (7)% loss ratio, primarily driven by a $77 million reserve release reflecting favorable cure performance and a reduction in the claim rate expectation from 10% to 9%[4] - Net premiums earned grew to $245 million, up 2% sequentially and 3% year-over-year, driven by growth in insurance-in-force and premiums from adjacencies like Enact Re's GSE CRT participation[4] Capital Management and Shareholder Returns Enact actively managed its capital through debt refinancing, share repurchases, and increased dividends, while maintaining strong PMIERs sufficiency - The company issued $750 million of 6.25% Senior Notes due 2029 and used the proceeds to redeem its 6.5% Senior Notes due 2025, extending maturities and saving approximately $2 million in annual interest expense[5] - Shareholder returns were enhanced through a new $250 million share repurchase program and an increased quarterly dividend to $0.185 per share[5][6] - In Q2, approximately 1.6 million shares were repurchased for $49 million[5][6] - The company now anticipates a total capital return to shareholders of between $300 million and $350 million for the full year 2024, subject to performance and market conditions[6] Key Capital and Book Value Metrics | Metric | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | PMIERs Sufficiency (%) | 169% | 163% | | PMIERs Sufficiency ($) | $2,057 million | $1,883 million | | Book Value Per Share ($) | $30.91 | $29.89 | | Book Value Per Share (ex-AOCI) ($) | $32.43 | $31.40 | Financial Statements This section presents the unaudited consolidated financial statements for the second quarter of 2024, including the Statements of Income and Balance Sheets Exhibit A: Consolidated Statements of Income This exhibit details the company's revenues, expenses, and profitability for the reported periods, culminating in net income and adjusted operating income Consolidated Statements of Income (in thousands) | (In thousands) | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Total revenues | $298,834 | $291,576 | $277,522 | | Premiums | $244,567 | $240,747 | $238,520 | | Net investment income | $59,773 | $57,111 | $50,915 | | Total losses and expenses | $64,005 | $85,655 | $63,375 | | Losses incurred | $(16,821) | $19,501 | $(4,070) | | INCOME BEFORE INCOME TAXES | $234,829 | $205,921 | $214,147 | | NET INCOME | $183,673 | $160,988 | $168,020 | | Adjusted Operating Income | $201,115 | $166,235 | $178,323 | Exhibit B: Consolidated Balance Sheets This exhibit provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at the end of the reporting periods Consolidated Balance Sheets (in thousands) | (In thousands) | Q2 2024 | Q1 2024 | 2023 | | :--- | :--- | :--- | :--- | | Total assets | $6,349,372 | $6,303,683 | $5,923,860 | | Total investments | $5,343,658 | $5,361,101 | $4,925,888 | | Cash and cash equivalents | $344,444 | $614,330 | $691,416 | | Total liabilities | $1,523,543 | $1,589,919 | $1,547,964 | | Loss reserves | $508,138 | $531,443 | $490,203 | | Long-term borrowings | $742,368 | $746,090 | $744,100 | | Total equity | $4,825,829 | $4,713,764 | $4,375,896 | Non-GAAP Financial Measures The company uses non-GAAP measures like adjusted operating income to assess core performance, excluding non-recurring items, and provides their definitions and GAAP reconciliations - Adjusted operating income is defined as net income excluding the after-tax effects of net investment gains/losses, restructuring costs, infrequent or unusual non-operating items, and gain/loss on debt extinguishment[11] - Management uses these non-GAAP measures because they believe it helps investors identify income attributable to ongoing operations and provides a basis for performance evaluation comparable to that used by analysts[14] Forward-Looking Statements This section contains a standard safe harbor statement, cautioning that forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements, identified by words such as "will," "anticipate," "expect," and "believe," which are subject to risks and uncertainties and are not guarantees of future performance[10] - Potential risks that could cause results to differ include economic downturns, changes in GSE policies, competition, and other factors described in the company's SEC filings, such as the 2023 Annual Report on Form 10-K[10]