Executive Summary / Key Takeaways

• Enact Holdings ($ACT) demonstrates robust financial resilience and a strong commitment to shareholder returns, evidenced by a significant increase in its 2025 capital return expectation to approximately $500 million, alongside a 14% dividend hike and a new $350 million share repurchase program.
• The company's proprietary Rate360 pricing engine, leveraging machine learning and granular data, provides a critical technological differentiator, enabling agile, risk-adjusted pricing and prudent risk selection in a competitive and evolving mortgage insurance market.
• Despite macroeconomic uncertainties, including elevated mortgage rates and trade policy concerns, Enact's prime-focused portfolio exhibits strong credit quality, characterized by a high risk-weighted average FICO score (746) and substantial embedded home price appreciation, mitigating potential losses.
• Disciplined expense management, with a lowered 2025 expense forecast of $219 million, and a robust capital position, including a 162% PMIERs sufficiency ratio and a conservative 12% debt-to-capital ratio, underscore the company's operational efficiency and financial strength.
• Enact's strategic focus on its core mortgage insurance business, complemented by growth in its Enact Re reinsurance subsidiary and continuous technological investment, positions it for sustained value creation, even as the housing market navigates affordability challenges and slower origination volumes.

A Foundation of Resilience: Enact's Strategic Blueprint in Mortgage Insurance

Enact Holdings, Inc. ($ACT) stands as a significant player in the U.S. private mortgage insurance (PMI) sector, a business it has cultivated through its primary subsidiary, Enact Mortgage Insurance Corporation (EMICO), since 1981. The company's core mission revolves around providing residential mortgage guaranty insurance, safeguarding lenders and investors against losses from loan defaults on residential real estate. This crucial service enables borrowers to achieve homeownership with lower down payments, typically less than 20%, and facilitates the liquidity of these loans in the secondary market, particularly through government-sponsored enterprises (GSEs) like Fannie Mae (FNMA) and Freddie Mac (FMCC).

Enact's journey, including its 2021 minority initial public offering (IPO), has been marked by a consistent drive to strengthen its financial foundation and enhance risk management capabilities. This strategic evolution includes the establishment of Enact Re Ltd., a Bermuda-based subsidiary that reinsures EMICO's policies, participating in GSE single and multifamily credit risk transfer (CRT) deals. This diversification is a capital and expense-efficient growth avenue, generating attractive risk-adjusted returns. The company's commitment to financial prudence was further underscored by its $750 million Senior Notes issuance in 2024, its first investment-grade debt as a public entity, which optimized its debt profile.

Technological Edge: Rate360 and Data-Driven Underwriting

A cornerstone of Enact's competitive strategy is its advanced technological infrastructure, particularly its proprietary Rate360 pricing engine. This comprehensive system, deployed in the first quarter of 2025, leverages proprietary data, extensive market information, sophisticated analytical models, and machine learning capabilities. Rate360 dynamically delivers competitive risk-adjusted pricing by factoring in actual and projected housing market trends at a highly detailed geographic level.

The tangible benefits of Rate360 are multifaceted. It enables Enact to achieve prudent risk selection and generate attractive returns by allowing for more effective and quicker pricing adjustments in a rapidly evolving and complex market. This technological differentiation enhances Enact's competitive moat, contributing directly to its financial performance through optimized pricing and improved margins. The continuous investment in such innovation is crucial for maintaining market positioning and driving long-term growth, particularly against rivals who may rely on less agile or less granular pricing models.

Competitive Landscape: Differentiated Strengths in a Crowded Field

The U.S. private mortgage insurance industry is highly competitive, with key players including MGIC Investment Corporation ($MTG), Radian Group Inc. ($RDN), Essent Group Ltd. ($ESNT), and NMI Holdings, Inc. ($NMIH). Enact's market share is influenced by its go-to-market strategy, pricing competitiveness, and selective participation in forward commitment transactions. While precise market share figures for all niche competitors are not publicly detailed, Enact maintains a significant presence, actively engaging with approximately 1,600 lenders, including all top 20 originators.

Enact's competitive standing is bolstered by its strong regulatory expertise, an established brand, and the network effects derived from its parent, Genworth (GNW). This expertise translates into efficient navigation of compliance, offering a reliable partnership for lenders. Compared to some peers, Enact emphasizes niche customization and strategic adaptability. For instance, while a competitor like Radian may have an edge in advanced analytics tools, Enact's Rate360 provides a direct technological counter, enabling superior risk-adjusted pricing. Similarly, against Essent's focus on cost efficiency, Enact differentiates through its specialized underwriting services and a strong balance sheet. Enact's consistent ratings upgrades, including an A2 from Moody's (MCO) and an A from Fitch, further validate its resilient business model and financial strength, enhancing its competitive appeal.

Financial Performance and Capital Strength

Enact delivered a strong performance in the third quarter of 2025, reporting adjusted operating income of $166 million, or $1.12 per diluted share, translating to an adjusted return on equity of 13%. For the first nine months of 2025, adjusted operating income reached $508.31 million. While premiums for the three months ended September 30, 2025, saw a modest decrease of 2% year-over-year to $244.69 million, primarily due to higher ceded premiums, net investment income surged by 12% to $68.61 million, driven by higher yields and increased average invested assets.

The company's credit performance remains a key strength. The risk-weighted average FICO score of its portfolio stands at 746, with a risk-weighted average loan-to-value (LTV) ratio of 93% and layered risk at a conservative 1.2% of risk in-force. New delinquencies in Q3 2025, at 12,998, were consistent with pre-pandemic seasonal trends, contributing $79 million in loss expense. The company recorded a $45 million reserve release in Q3 2025 due to favorable cure performance and loss mitigation activities, though the loss ratio for the quarter was 15%. Enact's disciplined expense management is evident in its lowered 2025 expense forecast (excluding reorganization costs) to approximately $219 million, a reduction achieved despite inflationary pressures.

Enact's capital position is robust, with a PMIERs sufficiency ratio of 162%, representing $1.9 billion above requirements as of September 30, 2025. This strong buffer is complemented by a conservative debt-to-capital ratio of 12%. The company's liquidity is solid, with $544 million in cash and cash equivalents, and a substantial portfolio of investment-grade fixed maturity securities. These financial strengths provide significant flexibility to navigate market dynamics and support strategic initiatives.

Outlook and Shareholder Returns

Enact's management is optimistic about the long-term health of the U.S. housing market, citing strong demographic tailwinds from first-time homebuyers. While the mortgage origination market remains slow due to elevated rates, the company expects the overall MI market size for 2025 to be similar to 2024 levels, around $300 billion. The company's persistency rate remains high at 83%, benefiting from a significant portion of its in-force policies having mortgage rates below current market levels. This elevated persistency helps offset slower new insurance written (NIW) volumes, which were $14 billion in Q3 2025, up 3% year-over-year.

A core tenet of Enact's strategy is returning capital to shareholders. The company has significantly increased its 2025 capital return expectation to approximately $500 million, up from an initial $350 million. This upward revision reflects strong business performance and current mortgage origination levels. This commitment is further demonstrated by a 14% increase in its quarterly dividend to $0.21 per share and a new $350 million share repurchase authorization. These actions underscore management's confidence in the company's financial strength and its ability to generate consistent value for investors.

Risks and Challenges

Despite its strengths, Enact operates within a dynamic and uncertain macroeconomic environment. Key risks include ongoing volatility from changing economic policies, potential impacts of tariffs, persistent inflationary pressures, and geopolitical tensions, all of which could materially affect housing markets. The uncertainty surrounding the duration of loans in delinquent inventory, including the effects of forbearance programs and foreclosure timing, poses a risk to loss reserve estimates. While embedded home price appreciation acts as a significant mitigant, extended forbearance and foreclosure timelines could negatively impact loss severity. Furthermore, the investment portfolio is exposed to market risks such as interest rate fluctuations, credit quality deterioration, and concentration risk.

Conclusion

Enact Holdings presents a compelling investment thesis rooted in its robust financial health, disciplined operational execution, and a clear commitment to shareholder value. The company's strategic investments in technology, particularly the Rate360 pricing engine, provide a distinct competitive advantage, enabling agile risk management and profitable growth in a highly competitive industry. Coupled with a resilient, prime-focused insurance portfolio, strong capital position, and a proactive approach to credit risk transfer, Enact is well-positioned to navigate the complexities of the current housing market. The consistent increase in capital return expectations and ongoing ratings upgrades underscore the company's ability to generate and return value, making it an attractive consideration for discerning investors seeking stability and growth in the specialty insurance sector.