Enact Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q3 2023 Enact Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press TAR 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press TAR 1-1 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Cole, Vice President of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to our third quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer, and Dean Mitchell, Chief Financial Officer and Treasurer. Rohit will provide an overview of our business performance and progress against our strategy. Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks. We will then take your questions. The earnings materials we issued after market closed yesterday contain our financial results for the quarter, along with a comprehensive set of financial and operational metrics. These are available on the investor relations section of the company's website at www.ir.enactmi.com. Today's call is being recorded and will include the use of forward-looking statements. These statements are based on current assumptions, estimates, expectations, and projections as of today's date. Additionally, they are subject to risks and uncertainties which may cause actual results to be materially different and we undertake no obligation to update or revise such statements as a result of new information. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, as well as in our filings with the FCC, which will be available on our website. Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures. Reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation, and our upcoming SEC filing on our website. With that, I'll turn the call over to Rohit.

Thanks, Daniel. Good morning, everyone. Our team delivered very strong results in the third quarter as we continued to execute against our strategy. We reported adjusted operating income of $164 million or $1.02 per deleted share, and generated a 15% adjusted operating return on equity. Insurance and force reached a record $262 billion, up 8% year over year, driven by new insurance written off $14 billion and persistency that remained elevated at 84%. We saw disciplined growth in our insured portfolio with stable new business production and higher persistency amid higher interest rates. Investment income continue to accelerate, and we continue to exercise expense discipline. Credit performance remains strong, accompanied by a seasonal uptake in new delinquencies and the seasoning of newer large books. We remain confident in our strategy and our business, and in the continued strength of the private mortgage insurance model. The economy continues to be resilient, supported by the strong labor market and household balance sheets that remain healthy. Having said that, macro factors including geopolitical conflicts, persistent inflation and higher interest rates, and a lessening of the cash buffers consumers have had since the pandemic continue to be risked. However, delinquency rates for prime mortgage borrowers are consistent with pre-pandemic levels. Our manufacturing quality continues to be strong, and credit risk remains well within our appetite. Even as housing activity has slowed amid higher borrowing costs, we remain confident in the long-term outlook for housing as well as demand for mortgage insurance. Home prices continue to be supported by low housing inventory and strong demand, particularly among first-time homebuyers, and mortgage insurance will remain an important tool to help buyers qualify for a mortgage. In addition, while higher interest rates have affected mortgage origination, higher persistency has continued to support insurance-enforced growth. As of September 30th, only 1% of the mortgages in our portfolio had raised at least 50 basis points above the prevailing market rate. Pricing on new insurance written remained constructive in the quarter. In response to continued macroeconomic uncertainty, We increased our price on NIW, ensuring we continue to underwrite risk at the appropriate level while remaining competitive. The credit quality of our insured portfolio remains strong. The weighted average FICO score was 744. The weighted average loan-to-value ratio was 93%, and our layered risk remained level with the second quarter at 1.3% of risk in force. Our delinquency rate was 2%, up 11 basis points sequentially, flat year over year, and consistent with pre-pandemic levels. The loss ratio in the quarter was 7%. Continued strength in the labor market, healthy household balance sheets, and our loss mitigation efforts helped drive strong cure activity, and as a result, we released $55 million of results. New delinquencies rose in the quarter. primarily driven by seasonality and the seasoning of newer large books. We continue to take a prudent approach to loss reserves and believe we are well-reserved for a range of scenarios. We continue to operate from a position of financial strength and remain well-capitalized relative to regulatory requirements. PMIR sufficiency at the end of the quarter remains strong at 162% or $2 billion of sufficiency. and 91% of our risk in force was covered by credit risk transfers. We remain disciplined with respect to capital allocation and focus on our three pillars, supporting our policyholders, investing to enhance and diversify our platform, and returning capital to our shareholders. As previously announced, during the second quarter, we launched an Act Re, a reinsurer that expands our franchise to access to new business opportunities including the GSC credit risk transfer market. I'm pleased to note that Anacri participated in all six of the GSC deals that came to market since its launch. Between its quota share agreement with Emoco and its successful participation in the GSC transaction, Anacri continues to utilize the capital initially contributed by Emoco, and we are pleased with the strong underwriting and attractive risk-adjusted returns we have seen from these transactions. we continue to see Anacri as a long-term capital and expense-efficient growth opportunity. We also continue to pursue ways to expand the Anacri platform into new related opportunities. During the quarter, we entered into an agreement with Core Specialty through which Anac will provide underwriting advisory and expertise, market intelligence, and portfolio analysis in support of Core Specialty's entrance into the mortgage reinsurance market through GSE credit risk transfer. Core Specialty closes first transaction during the quarter, leveraging ANAC's mortgage expertise, and we look forward to continuing to support Core Specialty and expanding on this market opportunity. We also continue to return capital to our shareholders. I'm pleased to note that yesterday we announced the board's approval of a special cash dividend of approximately $113 million for 71 cents per share, as well as the authorization of over 16 cents per share quarterly dividend. And we continue to repurchase shares during the quarter. We remain committed to returning $300 million of capital to shareholders in 2023 through a combination of quarterly and special dividends and our share repurchase program. On the whole, our distributions to shareholders reflect our commitment to our capital allocation goals, the strength of our balance sheet, the sustainability of our cash flows, and the confidence we have in our business. We are very pleased with the performance we have delivered in 2023 to date and remain confident in our business as the year comes to a close. Our portfolio is strong, with significant risk protection through our CRT program, as is our balance sheet and ability to deliver returns. I will now turn the call over to Dean.