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Enact (ACT) - 2024 Q4 - Earnings Call Transcript
ACTEnact (ACT)2025-02-05 23:35
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Financial Data and Key Metrics Changes - For the full year 2024, adjusted operating income reached a record high of 718millionor718 million or 4.56 per diluted share, up 9% year over year [11] - Adjusted return on equity was 15% and adjusted book value increased by 12% year over year to 34.16pershare[11]−InQ42024,adjustedoperatingincomewas34.16 per share [11] - In Q4 2024, adjusted operating income was 169 million, up 7% year over year, with adjusted earnings per share at 1.09[14][30]BusinessLineDataandKeyMetricsChanges−Newinsurancewrittenfortheyeartotaled1.09 [14][30] Business Line Data and Key Metrics Changes - New insurance written for the year totaled 51 billion, with record insurance in force at 269billion,supportingapproximately140,000families[12]−InQ4,primaryinsuranceinforceincreasedto269 billion, supporting approximately 140,000 families [12] - In Q4, primary insurance in force increased to 269 billion, up 1billionsequentiallyandup1 billion sequentially and up 66 billion or 2% year over year [32] - New insurance written in Q4 was 13billion,down213 billion, down 2% sequentially but up 27% year over year [32] Market Data and Key Metrics Changes - The operating environment in the US housing market remains constructive, with long-term demographic drivers of housing demand robust [15] - Labor markets showed resilience with consistent wage growth surpassing inflation [16] - Approximately 70% of insurance in force had mortgage rates below 6%, indicating strong credit quality [17] Company Strategy and Development Direction - The company aims to extend its platform into compelling adjacencies leveraging capabilities across mortgage, housing, and credit [24] - Enact RE continues to participate in attractive GSE single and multi-family deals, viewed as a long-term growth opportunity [24] - The capital allocation priorities include supporting existing policyholders, investing in business growth, and returning excess capital to shareholders [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term view of the US economy and housing, despite current challenges [16] - The company remains committed to helping people achieve homeownership responsibly, which underpins all business aspects [54] - Management noted that the aging of the portfolio should slow the increase in new delinquency development [71] Other Important Information - The company returned 354 million to shareholders in 2024, exceeding the high end of capital return guidance [13] - Ratings were upgraded by S&P from BBB+ to A- and by Fitch from A- to A, reflecting the strength of the business model [13] - The company maintained a disciplined approach to expense management, reducing expenses by 2% year over year [20] Q&A Session Summary Question: Capital return guidance and potential for increase - Management confirmed the capital return guidance of $350 million for 2025, with the possibility of reassessing based on business performance and macroeconomic conditions [59][60] Question: Reinsurance business and GSE CRT volume - Management indicated potential for GSE CRT volume to increase under different scenarios, which would allow for attractive risk-adjusted returns [64] Question: Impact of portfolio seasoning on delinquencies - Management noted that the average age of the portfolio increased, which should slow the increase in new delinquency development [71]