Enact (US:ACT)2024-11-08 17:06Financial Data and Key Metrics Changes - Adjusted operating income for Q3 2024 was $182 million, an increase of 11% year-over-year [9] - Adjusted EPS was $1.16, with adjusted return on equity at 15% and adjusted book value per share at $33.27, up 3% sequentially and 10% year-over-year [9][24] - GAAP net income was $181 million or $1.15 per diluted share, compared to $1.02 per diluted share in the same period last year [24] Business Line Data and Key Metrics Changes - Primary insurance in force increased to $268 billion, up $2 billion sequentially and up $6 billion or 2% year-over-year [26] - New insurance written was approximately $14 billion, flat sequentially and down 6% year-over-year [26] - Net premiums earned were $249 million, up $4 million or 2% sequentially and up $6 million or 2% year-over-year [28] Market Data and Key Metrics Changes - Persistency was 83% in Q3 2024, flat sequentially and down one percentage point year-over-year [26] - 70% of the insurance portfolio has mortgage rates below 6%, which helps mitigate the impact of higher mortgage rates [27][13] - The risk-weighted average FICO score of the portfolio was 745, with a risk-weighted average loan-to-value ratio of 93% [13] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet, investing in business growth, and returning capital to shareholders [17][22] - Enact Re has been launched to expand into the GSE credit risk transfer market, achieving an A- rating from S&P [20] - The company aims to deepen relationships with lenders through technology enhancements and operational efficiencies [18] Management's Comments on Operating Environment and Future Outlook - The U.S. economy remains strong, with healthy consumer and labor markets, although there are potential macroeconomic risks [10] - The company expects elevated persistency to continue, helping to offset lower production in the current higher rate environment [27] - Management remains committed to driving shareholder value while navigating a dynamic environment [23] Other Important Information - The company returned $100 million to shareholders through share buybacks and dividends in Q3 2024, totaling $283 million returned year-to-date [21][44] - Operating expenses were $56 million, with a focus on controlling costs while investing in technology [38][39] Q&A Session Summary Question: Competitive dynamics in the industry - Management noted that MI pricing remains competitive and constructive, with confidence in writing new business that delivers attractive returns [48][49] Question: Hurricane impact on reserves - Management indicated that Hurricane Beryl had a modest impact, with no adjustments made to reserves for related delinquencies [53][54] Question: Growth of Enact Re - Management expressed satisfaction with the growth of Enact Re, emphasizing a long-term growth strategy rather than short-term expectations [56][58] Question: Housing policy and regulatory changes - Management highlighted the importance of upcoming regulatory appointments and the potential impact on the industry, noting a strong track record of navigating regulatory environments [60][62] Question: Normalized delinquency ratios - Management explained that delinquency ratios depend on credit characteristics and macroeconomic conditions, with expectations for delinquencies to plateau between years three and four [66][68]