Enact Reports Third Quarter 2023 Results
_______________________________________
GAAP Net Income of
Adjusted Operating Income of
Return on Equity of 14.9% and Adjusted Operating Return on Equity of 14.9%
PMIERs Sufficiency of 162% or
Book Value Per Share of
Announces quarterly cash dividend of
“Our team again delivered record insurance in force, higher investment income, and expense discipline which drove another strong quarter of performance,” said
Key Financial Highlights
| (In millions, except per share data or otherwise noted) | 3Q23 | 2Q23 | 3Q22 |
| Net Income (loss) | |||
| Diluted Net Income (loss) per share | |||
| Adjusted Operating Income (loss) | |||
| Adj. Diluted Operating Income (loss) per share | |||
| NIW ($B) | |||
| Primary IIF ($B) | |||
| Persistency | 84% | 84% | 82% |
| Net Premiums Earned | |||
| Losses Incurred | |||
| Loss Ratio | 7% | (2)% | (17)% |
| Operating Expenses | |||
| Expense Ratio | 23% | 23% | 25% |
| Net Investment Income | |||
| Net Investment gains (losses) | |||
| Return on Equity | 14.9% | 15.5% | 18.6% |
| Adjusted Operating Return on Equity | 14.9% | 16.4% | 18.6% |
| PMIERs Sufficiency ($) | |||
| PMIERs Sufficiency (%) | 162% | 162% | 174% |
Third Quarter 2023 Financial and Operating Highlights
- Net income was
$164 million , or$1.02 per diluted share, compared with$168 million , or$1.04 per diluted share, for the second quarter of 2023 and$191 million , or$1.17 per diluted share, for the third quarter of 2022. - Adjusted operating income was
$164 million , or$1.02 per diluted share, compared with$178 million , or$1.10 per diluted share, for the second quarter of 2023 and$191 million , or$1.17 per diluted share, for the third quarter of 2022. - New insurance written (NIW) was
$14 billion , down 5% from$15 billion in the second quarter of 2023 and down 4% from the prior year primarily driven by lower mortgage originations. NIW for the current quarter was comprised of 98% monthly premium policies and 98% purchase originations. - Primary Insurance-In-Force was a record
$262 billion , up 2% from$258 billion in the second quarter of 2023 and up 8% from$242 billion in the third quarter of 2022. - Persistency was 84%, flat with the second quarter of 2023 and up from 82% in the third quarter of 2022. Persistency has remained elevated, driven by high mortgage rates and approximately 1% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market rate.
- Net premiums earned were
$243 million , up 2% from$239 million in the second quarter of 2023 and up 4% from$235 million in the third quarter of 2022. Net premiums increased sequentially primarily as a result of insurance in-force growth and slightly lower ceded premiums. The year-over-year increase was driven by insurance in-force growth, partially offset by the lapse of older, higher priced policies. Net earned premium yield was flat from the second quarter of 2023 and down from the third quarter of 2022. - Losses incurred for the third quarter of 2023 were
$18 million and the loss ratio was 7%, compared to$(4) million and (2)%, respectively, in the second quarter of 2023 and$(40) million and (17)%, respectively, in the third quarter of 2022. The sequential increases in losses and loss ratio were driven by higher current quarter delinquencies, primarily driven by seasonal trends and the normal loss development of new, large books. The higher new delinquencies were partially offset by favorable cure performance from 2022 and earlier delinquencies that remained above our expectations, which resulted in a$55 million reserve release in the quarter. - The delinquency rate at quarter end was 1.97%, compared to 1.86% as of
June 30, 2023 , and 1.99% as ofSeptember 30, 2022 . - Operating expenses in the current quarter were
$55 million and the expense ratio was 23%, compared to$55 million and 23%, respectively, in the second quarter of 2023 and$58 million and 25%, respectively in the third quarter of 2022. The year-over-year decrease was driven in part by the impact of our cost reduction initiatives, including the impact from our previously announced renegotiated shared services agreement with Genworth and our voluntary separation program executed in the fourth quarter of 2022. - Net investment income was
$55 million , up from$51 million in the second quarter of 2023 and$39 million in the third quarter of 2022, driven by rising interest rates and higher average invested assets. - Net investment loss was down
$13 million from the second quarter of 2023. In the second quarter of 2023 we identified assets that upon selling generated an opportunity to recoup losses through higher net investment income over the next couple of years. - Annualized return on equity for the third quarter of 2023 was 14.9% and annualized adjusted operating return on equity was 14.9%. This compares to second quarter 2023 results of 15.5% and 16.4%, respectively, and to third quarter 2022 results of 18.6% and 18.6%, respectively.
Capital and Liquidity
- Enact Re has participated in four Fannie Mae and two Freddie Mac reinsurance transactions.
- In August, the Company’s Board of Directors approved a new share repurchase program with authorization to purchase up to
$100 million of common stock. - PMIERs sufficiency was 162% and
$2,017 million above the PMIERs requirements, compared to 162% and$1,958 million above the PMIERs requirements in the second quarter of 2023. Enact Holdings, Inc. held$128 million of cash and$285 million of invested assets as ofSeptember 30, 2023 . Combined cash and invested assets decreased$48 million from the prior quarter, primarily due to our third quarter common dividend and interest payment on our long-term debt.
Recent Events
- During the quarter, repurchases under our share repurchase program totaled
$6 million . Year to date throughOctober 2023 , we have made$78 million in repurchases authorized under our existing share repurchase programs. - Inclusive of quarterly dividends and share repurchases to date, Enact has returned approximately
$150 million to shareholders in 2023. - Announced separately today that our Board of Directors has declared a quarterly dividend of approximately
$23 million , or$0.16 per common share, and approved a special cash dividend of approximately$113 million , or$0.71 per common share. Both are payable onDecember 5, 2023 , to shareholders of record onNovember 16, 2023 . Future dividends will be subject to Board approval. - We remain committed to returning
$300 million to shareholders by year-end.
Conference Call and Financial Supplement Information
This press release, the third quarter 2023 financial supplement and earnings presentation are now posted on the Company’s website, https://ir.enactmi.com. Investors are encouraged to review these materials.
Enact will discuss third quarter financial results in a conference call tomorrow,
The webcast also will be archived on the Company’s website for one year.
About Enact
Enact (Nasdaq: ACT), operating principally through its wholly-owned subsidiary
Safe Harbor Statement
This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements may address, among other things, our expected financial and operational results, the related assumptions underlying our expected results, and the quotations of management. These forward-looking statements are distinguished by use of words such as “will,” “may,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” “predict,” “project,” “target,” “could,” “should,” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. Our forward-looking statements contained herein speak only as of the date of this press release. Factors or events that we cannot predict, including uncertainty around Covid-19 and the effects of government and other measures seeking to contain its spread; supply chain constraints; inflation; increases in interest rates; risks related to an economic downturn or recession in
GAAP/Non-GAAP Disclosure Discussion
This communication includes the non-GAAP financial measures entitled “adjusted operating income (loss)”, “adjusted operating income (loss) per share," and “adjusted operating return on equity." Adjusted operating income (loss) per share is derived from adjusted operating income (loss). The chief operating decision maker evaluates performance and allocates resources on the basis of adjusted operating income (loss). The
While some of these items may be significant components of net income (loss) in accordance with
Adjustments to reconcile net income (loss) available to the Company’s common stockholders to adjusted operating income (loss) assume a 21% tax rate.
The tables at the end of this press release provide a reconciliation of net income (loss) to adjusted operating income (loss) and
Exhibit A: Consolidated Statements of Income (amounts in thousands, except per share amounts)
| 3Q23 | 2Q23 | 3Q22 | |||||||
| REVENUES: | |||||||||
| Premiums | |||||||||
| Net investment income | 54,952 | 50,915 | 39,493 | ||||||
| Net investment gains (losses) | (23) | (13,001) | (42) | ||||||
| Other income | 760 | 1,088 | 564 | ||||||
| Total revenues | 299,035 | 277,522 | 275,075 | ||||||
| LOSSES AND EXPENSES: | |||||||||
| Losses incurred | 17,847 | (4,070) | (40,309) | ||||||
| Acquisition and operating expenses, net of deferrals | 52,339 | 51,887 | 54,523 | ||||||
| Amortization of deferred acquisition costs and intangibles | 2,803 | 2,645 | 3,338 | ||||||
| Interest expense | 12,941 | 12,913 | 12,879 | ||||||
| Total losses and expenses | 85,930 | 63,375 | 30,431 | ||||||
| INCOME BEFORE INCOME TAXES | 213,105 | 214,147 | 244,644 | ||||||
| Provision for income taxes(1) | 48,910 | 46,127 | 53,658 | ||||||
| NET INCOME | $164,195 | $168,020 | $190,986 | ||||||
| Net investment (gains) losses | 23 | 13,001 | 42 | ||||||
| Costs associated with reorganization | 3 | 41 | (156) | ||||||
| Taxes on adjustments | (5) | (2,739) | 24 | ||||||
| Adjusted Operating Income | $164,216 | $178,323 | $190,896 | ||||||
| Loss ratio(2) | 7% | (2)% | (17)% | ||||||
| Expense ratio(3) | 23% | 23% | 25% | ||||||
| Earnings Per Share Data: | |||||||||
| Net Income per share | |||||||||
| Basic | |||||||||
| Diluted | |||||||||
| Adj operating income per share | |||||||||
| Basic | |||||||||
| Diluted | |||||||||
| Weighted-average common shares outstanding | |||||||||
| Basic | 160,066 | 161,318 | 162,843 | ||||||
| Diluted | 161,146 | 162,171 | 163,376 | ||||||
(1) Provision for income taxes for the three-month period ended
(2) The ratio of losses incurred to net earned premiums.
(3) The ratio of acquisition and operating expenses, net of deferrals, and amortization of deferred acquisition costs and intangibles to net earned premiums. Expenses associated with strategic transaction preparations and restructuring costs did not impact the expense ratio for the three-month periods ended
Exhibit B: Consolidated Balance Sheets (amounts in thousands, except per share amounts)
| Assets | 3Q23 | 2Q23 | 3Q22 | ||||||
| Investments: | |||||||||
| Fixed maturity securities available-for-sale, at fair value | |||||||||
| Short term investments | 18,173 | 10,849 | 2,434 | ||||||
| Total investments | 5,008,865 | 4,925,888 | 4,880,336 | ||||||
| Cash and cash equivalents | 677,990 | 691,416 | 535,775 | ||||||
| Accrued investment income | 42,051 | 37,726 | 35,896 | ||||||
| Deferred acquisition costs | 25,572 | 25,843 | 26,310 | ||||||
| Premiums receivable | 44,310 | 43,525 | 40,331 | ||||||
| Other assets | 82,196 | 80,363 | 69,040 | ||||||
| Deferred tax asset | 119,704 | 119,099 | 135,152 | ||||||
| Total assets | $6,000,688 | $5,923,860 | $5,722,840 | ||||||
| Liabilities and Shareholders' Equity | |||||||||
| Liabilities: | |||||||||
| Loss reserves | |||||||||
| Unearned premiums | 161,580 | 174,561 | 212,987 | ||||||
| Other liabilities | 136,057 | 139,100 | 140,413 | ||||||
| Long-term borrowings | 744,752 | 744,100 | 742,211 | ||||||
| Total liabilities | 1,543,482 | 1,547,964 | 1,605,848 | ||||||
| Equity: | |||||||||
| Common stock | 1,600 | 1,602 | 1,628 | ||||||
| Additional paid-in capital | 2,322,622 | 2,324,527 | 2,379,576 | ||||||
| Accumulated other comprehensive income | (400,349) | (345,243) | (427,085) | ||||||
| Retained earnings | 2,533,333 | 2,395,010 | 2,162,873 | ||||||
| Total equity | 4,457,206 | 4,375,896 | 4,116,992 | ||||||
| Total liabilities and equity | $6,000,688 | $5,923,860 | $5,722,840 | ||||||
| Book value per share | |||||||||
| Book value per share excluding AOCI | |||||||||
| 14.9% | 15.5% | 18.6% | |||||||
| Net investment (gains) losses | 0.0% | 1.2% | 0.0% | ||||||
| Costs associated with reorganization | 0.0% | 0.0% | 0.0% | ||||||
| Taxes on adjustments | 0.0% | -0.3% | 0.0% | ||||||
| Adjusted Operating ROE(2) | 14.9% | 16.4% | 18.6% | ||||||
| Debt to Capital Ratio | 14% | 15% | 15% | ||||||
(1) Calculated as annualized net income for the period indicated divided by the average of current period and prior periods’ ending total stockholders’ equity
(2) Calculated as annualized adjusted operating income for the period indicated divided by the average of current period and prior periods’ ending total stockholders’ equity
Investor Contact
EnactIR@enactmi.com
Media Contact
Source:
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