Enact (US:ACT)2023-11-05 05:42Financial Data and Key Metrics Changes - Adjusted operating income was $164 million or $1.02 per diluted share, with a 15% adjusted operating return on equity [5][14] - GAAP net income was $164 million or $1.02 per diluted share, compared to $1.17 per diluted share in the same period last year [14] - Insurance-in-force reached a record $262 billion, up 8% year-over-year [6][15] Business Line Data and Key Metrics Changes - New insurance written was $14 billion, down $1 billion or 5% sequentially and down $1 billion or 4% year-over-year [15] - Net premiums earned were $243 million, up $5 million or 2% sequentially and up $8 million or 4% year-over-year [16] - Investment income was $55 million, up 8% sequentially and up 39% year-over-year [17] Market Data and Key Metrics Changes - Delinquency rate was 2%, up 11 basis points sequentially, flat year-over-year [9] - Weighted average FICO score was 744, and the weighted average loan-to-value ratio was 93% [8] - PMIERs Sufficiency remained strong at 162%, or $2 billion above PMIERs requirements [20] Company Strategy and Development Direction - The company focuses on three pillars: supporting policyholders, investing to enhance and diversify the platform, and returning capital to shareholders [10][12] - Enact Re, a reinsurer launched to access new business opportunities, participated in all GSE deals since its launch [10][11] - The company aims to return $300 million of capital to shareholders in 2023 through dividends and share repurchases [12][22] Management's Comments on Operating Environment and Future Outlook - The economy remains resilient, supported by a strong labor market, but risks include geopolitical conflicts and persistent inflation [6] - Management remains confident in the long-term outlook for housing and demand for mortgage insurance despite higher interest rates affecting mortgage originations [7] - The company is well-capitalized and continues to operate from a position of financial strength [20] Other Important Information - The company released $55 million of reserves due to strong cure activity [9] - Operating expenses were $55 million, flat sequentially and down 5% year-over-year [19] - The company has returned approximately $150 million to shareholders year-to-date [22] Q&A Session Summary Question: Capital return strategy and mix between buybacks and dividends - Management indicated that the capital return mix will be dictated by share repurchase opportunities and the durability of the quarterly dividend [26][28] Question: Investment portfolio and new money yield - The effective duration of the portfolio is about 3.5 years, with new money yields around 5.5% [30] Question: Performance of post-pandemic vintages - Credit performance remains strong, with no deterioration in performance across credit cohorts or vintages [32][33] Question: Impact of builder-driven originations - The company sees builder-driven originations as beneficial, with a focus on new homes driving more of the origination market [42][43] Question: GSE CRT deals and expected returns - Management has not provided specific guidance on returns from GSE CRT deals but finds the quality of underwriting and returns attractive [54][62] Question: Bermuda's tax rate impact on competition - Higher taxes in Bermuda could lead to higher returns for the company as competitors may need to adjust their pricing [60]