Enact (ACT) Q4 2023 earnings summary

Executive summary

• Record primary insurance in force (IIF) of $263B at year-end, up 6% YoY, supported by $53B of FY23 new insurance written and elevated persistency.

• FY23 net income was $666M and adjusted operating income was $676M; disciplined costs and credit performance supported results.

• Returned more than $300M to shareholders in 2023 while maintaining $1.887B of PMIERs sufficiency, or 161%.

Financial highlights

• FY23 net income was $666M vs. $704M in FY22; adjusted operating income was $676M vs. $708M. Diluted EPS was $4.11 and adjusted diluted operating EPS was $4.18.

• 4Q23 net income was $157M, or $0.98 per diluted share, and adjusted operating income was $158M, or $0.98 per diluted share.

• FY23 net premiums earned were $957M vs. $939M in FY22; net investment income was $207M vs. $155M, while net investment losses were $14M vs. $2M.

• FY23 operating expenses fell 7% YoY to $223M, below the $225M target; 4Q expenses were $59M, up 7% QoQ.

• 4Q net premiums earned were $240M, down 1% QoQ and up 3% YoY, supported by IIF growth and partly offset by higher ceded premiums and policy lapses.

Outlook and guidance

• Elevated persistency is expected to offset lower production associated with higher mortgage rates.

• Expected total capital returned in 2024 to be similar to 2023 levels; priorities include responsible IIF growth, platform investment and policyholder support.

• January quota-share agreement will cede ~21% of expected 2024 book-year NIW, providing ~$2.7B of ceded RIF; ceding commission is 20% of ceded premiums, with profit commission up to 55%, reduced by ceded losses.

• February excess-of-loss reinsurance provides up to $255M of coverage for part of current and expected 2024 book-year business, effective January 1, 2024.