ACT Q4 Deep Dive: Credit Resilience, Expense Discipline, and Capital Return Drive Market Optimism

Mortgage insurance provider Enact Holdings (NASDAQ:ACT) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 2.1% year on year to $315.6 million. Its non-GAAP profit of $1.23 per share was 11.9% above analysts’ consensus estimates.

Is now the time to buy ACT? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Enact Holdings’ fourth quarter was marked by disciplined execution and strong credit performance, resulting in a positive market response. Management credited robust new insurance written volumes, prudent risk selection, and the continued rollout of their Rate360 pricing engine as key drivers. CEO Rohit Gupta highlighted that “cure performance continues to outperform our expectations,” due in part to effective loss mitigation and favorable borrower behavior. Additionally, the company benefited from a significant net reserve release, enabled by improved claim rates and sustained portfolio quality.

Looking forward, Enact Holdings’ guidance is shaped by demographic tailwinds, strategic capital allocation, and ongoing expense management. Management is focused on leveraging favorable housing demand among first-time buyers and maintaining flexibility amid policy changes and mortgage market volatility. CFO Dean Mitchell emphasized, "we're confident in our ability to return $500 million to shareholders in 2026," while CEO Rohit Gupta noted continued engagement with regulators and partners to adapt to evolving affordability and supply challenges.

Key Insights from Management’s Remarks

Management attributed quarterly performance to resilient credit metrics, elevated persistency rates, and the impact of technology-driven pricing and underwriting enhancements.

• Strong risk management: Enact’s use of advanced analytics and machine learning in its Rate360 pricing engine allowed the company to dynamically assess and price risk, supporting disciplined new insurance written and helping maintain a high average FICO score in its portfolio.

• Elevated persistency: Despite lower mortgage rates, 59% of Enact’s loan book remained below 6%, reinforcing elevated persistency and helping to sustain the insurance in-force portfolio at $273 billion, even as refinancing activity increased.

• Effective loss mitigation: The company achieved a net reserve release of $60 million during the quarter, primarily due to improved cure rates—meaning more borrowers cured their delinquencies than expected—which also enabled a reduction in projected claim rates from 9% to 8%.

• Expense discipline: Operating expenses were kept flat year-over-year, which management attributed to ongoing investments in technology and process innovation. CEO Rohit Gupta explained that Enact’s efficiency gains have been driven by these investments since the company’s IPO.

• Capital flexibility: The company ended the quarter with a PMIERs (Private Mortgage Insurer Eligibility Requirements) sufficiency ratio of 162% and secured a new $435 million credit facility. This strong capital position, combined with active credit risk transfer (CRT) transactions, provided both regulatory flexibility and the ability to support future growth and shareholder returns.

Drivers of Future Performance

Enact’s outlook for the next year is anchored by expected growth in purchase mortgage originations, careful risk management, and sustained expense discipline.

• Housing demand and demographics: Management expects demographic trends, especially among first-time homebuyers, to drive long-term demand for private mortgage insurance. CEO Rohit Gupta pointed to external forecasts projecting an 8–24% increase in purchase originations, with Enact using a 10–15% market growth range for planning purposes.

• Macro and regulatory environment: The company is monitoring potential regulatory changes, such as FHA rate cuts and shifts in credit score requirements, which could influence pricing and business mix. Management stated it remains “actively engaged” with policymakers and is prepared to adapt to evolving rules impacting affordability and supply.

• Expense and capital management: Continuing its focus on technology-driven efficiency, Enact anticipates operating expenses to remain flat in 2026, supporting margin stability. The company also reiterated plans for about $500 million in capital returns, while maintaining flexibility to adjust based on market and regulatory developments.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the trajectory of purchase mortgage origination growth and how it translates to new insurance written, (2) the persistence of credit quality amid shifting macroeconomic and regulatory conditions, and (3) the company’s ability to sustain flat operating expenses while delivering planned capital returns. We will also watch for updates on Rate360’s market adoption and the impact of potential policy changes on portfolio performance.

Enact Holdings currently trades at $43.32, up from $40.33 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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