Enact (ACT) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $176 million or $1.08 per diluted share, which is up 7% year-over-year [6][20] - Return on equity was 17%, reflecting strong financial performance [6] - Insurance in-force reached a record $253 billion, up $21 billion or 9% year-over-year [7][21] - The loss ratio for the quarter was negative 5%, indicating a reserve release of $70 million [10][25] Business Line Data and Key Metrics Changes - New insurance written (NIW) was $13 billion, down 30% year-over-year due to lower mortgage originations [21] - Persistency remained high at 85%, up 9 percentage points year-over-year, supporting insurance in-force growth [22] - The weighted average FICO score in the portfolio was 744, with a loan-to-value ratio of 93% [9] Market Data and Key Metrics Changes - The pricing environment remained constructive, with pricing across the industry trending upwards [8] - Elevated interest rates have dampened mortgage origination volumes, but persistency has counterbalanced this effect [8][12] - The company expects the MI market size to be around $300 billion for 2023, down from 2022 levels [62] Company Strategy and Development Direction - The company is focused on disciplined capital allocation, supporting policyholders, enhancing product offerings, and returning capital to shareholders [15][31] - The commitment to a strong balance sheet and financial flexibility is emphasized, with PMIERs sufficiency at 164% [13][30] - The company aims to enhance and diversify its platform while maintaining operational excellence [10][15] Management's Comments on Operating Environment and Future Outlook - Management noted that while the macro environment remains uncertain, several positive economic factors support the MI industry [11] - The company is confident in the long-term strength of the MI industry despite short-term economic challenges [12] - Management highlighted the importance of maintaining a strong balance sheet and financial flexibility in the current environment [13][30] Other Important Information - The company received ratings upgrades from S&P and Moody's, enhancing its competitive position [14] - A 14% increase in the quarterly dividend to $0.16 per share was announced, reflecting confidence in cash flows [16][32] - The company released its inaugural ESG report, highlighting its commitment to corporate responsibility [18][19] Q&A Session Summary Question: Investment income outlook - Management discussed factors affecting investment income, including lower bond calls and cash accumulation impacting reinvestment rates [36][38] Question: Premium yield trajectory - Management indicated that while premium rates may fluctuate, they expect a decline less than in 2022, with a stable outlook for the year [39][40] Question: Ratings upgrades and GSE conditions - Management explained that the ratings upgrades and lifting of GSE conditions provide additional financial flexibility and support competitive positioning [42][46] Question: Premium rates and persistency - Management noted that persistency remains elevated due to high interest rates, and they expect it to remain strong in the near term [53][55] Question: Claims payments normalization - Management indicated that the timeline for claims development remains a couple of quarters out as servicers work to resolve delinquencies [56][57] Question: New insurance written and market share - Management expressed satisfaction with the $13 billion of new insurance written and emphasized a focus on quality over market share [59][61]