Enact Holdings, Inc.

Hello and welcome to ENAC's second quarter earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Cole, Vice President of Investor Relations. You may begin.

Thank you and good morning. Welcome to our second 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 our website. 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 SEC, 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.

Thank you, Daniel. Good morning, everyone. ANAC closed out the first half of the year with another strong quarter. Our results continue to reflect the disciplined execution of our strategy, robust credit performance, and our ongoing commitment to creating long-term value for our shareholders. To that end, we are pleased to announce a meaningful increase in our expected capital returns for 2025 to approximately $400 million, which we will discuss in more detail later. For the second quarter, we reported adjusted operating income of $174 million while adjusted earnings per diluted share was $1.15. Additionally, adjusted return on equity was over 13%. Insurance in force increased 1% year over year to $270 billion, and we generated robust new insurance return of over $13 billion. We continue to successfully navigate a complex macroeconomic environment, while certain indicators, such as labor market resilience, moderating wage growth, and the overall health of our borrowers remain strong, uncertainties persist. In particular, the lack of near-term clarity around trade policy and the potential implementation of reciprocal tariffs has introduced additional volatility to the outlook. Affordability continues to be challenged, and while home inventories have started to build up in certain geographies, there are more buyers than sellers at the national level. Having said that, our business is supported by strong demographic trends, especially within the historical first-time homebuyer segment. Overall, we continue to remain optimistic about the long-term health of the US housing market. Against this backdrop, our capital position and credit performance remain key strengths. At quarter end, We reported PMIR sufficiency ratio of 165%, providing significant financial flexibility, and our credit portfolio remains in excellent shape. At the end of the second quarter, approximately 7% of our insurance in force had mortgage rates at least 50 basis points above June's average mortgage rate of 6.8%, and the credit quality of our insured portfolio remains strong. The risk weighted average FICO score of the portfolio was 746. The risk weighted average loan to value ratio was 93%, and layered risk was 1.2% of risk in force. Pricing was again constructive in the quarter, and we maintained our commitment to prudent underwriting standards. Our pricing engine, rate 360, allows us to deliver competitive pricing on a risk adjusted basis and we continue to prudently underwrite and select risk. We saw favorable delinquency and cure performance during the quarter that followed typical seasonal sequential trends. Total delinquencies were down 1% sequentially, with new delinquencies also decreasing by 5%. Strong embedded equity, combined with our effective loss mitigation efforts, helped drive robust cure performance with a cure rate of 52%. This drove a reserve release of $48 million, and our resulting loss ratio for the quarter was 10%. Credit performance remains strong, and we are well reserved for a range of scenarios. On the expense front, we maintained our disciplined approach to expense management while investing in technologies and processes that improve customer experience and our business operations. Despite the ongoing inflationary environment, our expenses, excluding restructuring charges, were flat year over year. We continue to advance on all capital allocation priorities to support existing policyholders by maintaining a strong balance sheet, invest in our business to drive organic growth and efficiencies, fund attractive new business opportunities to diversify our platform, and return excess capital to shareholders. As it relates to diversification, Anacri continues to build momentum as we participate in single and multifamily GSE CRT transactions. Anacri remains capital and expense efficient and is contributing to our long-term earnings profile. As it relates to capital returns, during the second quarter, we returned $116 million to shareholders through share repurchases and dividends. And as I mentioned earlier, we are increasing our expected capital return to approximately $400 million for the year. Before handing the call over to Dean, I wanted to take a moment to recognize our culture and our people. For the third year, ANAC was recognized as one of the best places to work by Triangle Business Journal. We take pride in fostering an environment where our teams can thrive and do their best work in the service of our customers and stakeholders and are very pleased to have received this recognition. Overall, we are pleased with our performance through the first half of 2025. We are navigating a complex environment from a position of strength supported by robust new insurance written with excellent credit quality, a strong balance sheet, and prudent expense management. Additionally, we are working closely with our lending partners, the GFCs, and the administration to ensure we are well positioned to adapt to any regulatory changes. We were excited to see that MI premiums have become tax deductible again. With the support of a highly engaged team, we are focused on executing our strategy and maximizing value for our shareholders. With that, I will now hand it over to Dean to walk through our financial results in more detail.