Enact Holdings, Inc.

Hello and welcome to ANAC's second quarter earnings 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 Kohl, Vice President of Finance. 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 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.

Thank you, Daniel. Good morning, everyone. Before discussing our second quarter results, I would like to begin by saying that our thoughts are with Tom McInerney, who is a valued member of our board and strong supporter of an act. We wish Tom a full and speedy recovery. I also want to express my support for Jerome Upton as he steps into the role of Interim President and CEO of Genworth. Jerome has been an important member of Genworth's leadership team as well as Enact's board of directors for many years, and I'm confident he will provide thoughtful and steady leadership during this time, and I look forward to our continued partnership. Turning to our results, an act closed the first half of 2026 with another strong quarter, reflecting the disciplined execution of our strategy, resilient credit performance, and our continued focus on long-term, sustainable value creation. As a result of our strong performance, we are updating our 2026 capital return expectations to between $550 million and $600 million, up from our prior guidance of $500 million. I will discuss this in more detail shortly. For the second quarter, we reported adjusted operating income of $177 million, or $1.26 per diluted share. Adjusted return on equity was 13%, and we generated strong new insurance return of $15 billion, resulting in total insurance in force of $274 billion. The macro and housing environment remained dynamic as elevated interest rates, geopolitical developments, and policy uncertainty continued to contribute to market volatility. At the same time, the U.S. economy was resilient, supported by a healthy labor market and generally stable household balance sheets. Within housing, underlying demand fundamentals are strong, and while higher mortgage rates continue to temper overall transaction volumes, Purchase application activity benefited from the spring selling season. From a credit perspective, our portfolio is performing well, with recent books performing in line with our expectations. Persistency remained elevated at 80% during the quarter. This is supported by the rate environment, with approximately 57% of loans in our portfolio carrying mortgage rates below 6%. Looking ahead, Thank you for joining us. Layered risk was 1.1% of risk in force. Pricing remained constructive in the quarter while our participation was strong and our dynamic risk-adjusted pricing engine is enabling us to prudently target the right risk at the right price on a general level as market conditions evolve. As we continue to leverage technology to enable better risk selection and improve operational efficiency, We are pleased to announce that in addition to our pricing engine, we recently launched our Enact Loan Level Assistant, or Ella. This new tool is our internal underwriting innovation that applies generative AI to help underwriters make smarter underwriting decisions. By reviewing loan documents, identifying inconsistencies, and surfacing relevant insights more efficiently, Ella reduces repetitive tasks Thank you for joining us today. and total delinquencies declined 1%. Our strong cure performance was driven by favorable credit trends and effective loss mitigation efforts. This drove a reserve release of $37 million in the quarter, resulting in a loss ratio of 14%. Credit performance remains strong and we are well-reserved across a range of scenarios. We delivered another quarter of current expense management with operating expenses down year-over-year despite the inflationary environment. Dean will discuss the key drivers of this strong performance and our improved expectations for 2026. We continue to execute against our capital allocation priorities, maintaining a strong and resilient balance sheet to support existing policyholders, investing to drive organic growth and operating efficiencies, Funding attracted new business opportunities such as an Act V and returning excess capital to shareholders. At the end of the quarter, our PMR sufficiency ratio was 161%, providing significant financial flexibility, and our credit and investment portfolios were in excellent shape. Our strong capital position is further reinforced by our CRT program and the backing of our undrawn credit facility. We also continue to execute on our growth and diversification strategy. An act we delivered another quarter of strong performance, generating attractive risk-adjusted returns while remaining both capital and expense efficient. Finally, our strong performance supports continued robust returns to shareholders. During the quarter, we returned $127 million to share repurchases and dividends. As I mentioned, we have now increased our capital return expectations to between $550 to $600 million for 2026. This upward revision reflects our commitment to returning excess capital to shareholders while maintaining a strong balance sheet.