Enact Holdings, Inc. (ACT)

Cómo genera ingresos

Two engines. The first is premiums: Enact charges a premium calculated as a percentage of the original loan balance, paid monthly over the life of the policy, in a single upfront amount, annually, or split between the two. The rate is filed with state regulators and cannot be changed once coverage is issued, so a policy written today locks in its price for as long as it stays on the books. That makes persistency — the share of policies that survive each year, 82% in 2025 — the real driver of revenue: premiums are earned slowly over years, so the in-force portfolio, not the new business, is what pays. Net premiums earned were $980.5 million in 2025, and part of the premium is ceded away to reinsurers and capital-markets investors under the credit risk transfer programme ($132.9 million ceded in 2025). The second engine is the investment portfolio: premiums are collected long before claims are paid, and investing that float produced $266.2 million of net investment income in 2025, more than a fifth of total revenues. A small residual comes from fee-based contract underwriting services ($5.4 million of other income). Against this sits the cost of claims: the loss ratio was 11% in 2025, flattered by a $200 million reserve release.

The barrier is regulatory, not commercial. To write coverage the GSEs will accept, an insurer must be an approved insurer under the GSEs' eligibility criteria (PMIERs), which impose capital requirements — Enact held $5,015 million of available assets against $3,096 million of required assets at the end of 2025, a 162% sufficiency ratio — on top of state insurance licensing in all 50 states. That gate is why only six active private mortgage insurers exist, and Enact's own filing says its market share has stayed between 12.0% and 20.4% of quarterly new insurance written since 2012. But the filing is equally clear that the industry is highly competitive and that the competition runs on pricing, underwriting guidelines, service and credit ratings — the product is largely undifferentiated, and Enact also competes directly with the FHA and the VA, which had 35% and 26% of the mortgage insurance market in the first three quarters of 2025 and price flat regardless of borrower credit. A licence that few can obtain is a real advantage; pricing power over the five rivals who already hold one is not evident.

Demand is a derivative of the American mortgage cycle, and it moves in two directions at once. Volume depends on how many low down payment purchase mortgages are originated: Enact notes that mortgage insurance is used far more on purchase originations than on refinances, so a market dominated by refinancing produces less new business. Interest rates cut both ways — the filing says higher rates raise persistency, because most borrowers have loans priced below the market and will not refinance, which keeps the in-force book and its premiums alive; but falling rates trigger refinancing and cancellations that shrink it. Home prices work the same way in reverse: rising values let borrowers cancel coverage at 80% loan-to-value, shrinking revenue, while falling values raise claims. The dangerous part of the cycle is the downturn, where a recession lifts defaults on a book whose prices were fixed years earlier and cannot be repriced. Enact's own numbers show the swing: the loss ratio was 4% in 2024 and 11% in 2025, both years helped by reserve releases ($252 million and $200 million) rather than by underlying claims.

Riesgos clave

• Losing GSE eligibility under PMIERs — Enact discloses that if it cannot keep meeting the requirements mandated by PMIERs, or any additional restrictions the GSEs may impose, it may no longer be eligible to write new insurance on loans the GSEs acquire — which would have a material adverse effect on its business, results and financial condition. The GSEs may amend, waive or reinterpret PMIERs at their discretion, and updated requirements are being phased in between March 2025 and September 2026.
• A recession or a fall in home prices — The company lists a deterioration in economic conditions, a severe recession or a decline in home prices among its first risk factors, warning that these may adversely affect its loss experience. Falling home values both raise the frequency of claims and increase the loss on resale of properties taken through foreclosure.
• Loss reserves rest on estimates that may prove wrong — When notified that an insured loan is in default, Enact sets reserves based on management's estimates of claim rates and claim sizes. It discloses that these estimates depend on assumptions about parameters that may be volatile, and that actual claim payments may materially differ from the reserves booked. It adds that inaccurate models, or variability in loss development versus its actuarial assumptions, could have a material adverse effect.
• Concentration by customer and by geography — Enact warns that undue concentration by customer or region increases its exposure to the loss of business or to the poor performance of a small part of the portfolio. It notes that a significant customer may shift volume to another mortgage insurer, merge with a competitor, leave the mortgage business or choose an alternative to mortgage insurance, and that it cannot be certain lost business would be replaced.
• Fewer low down payment loans, or more cancellations — A decrease in the volume of Low Down Payment Loan originations or an increase in mortgage insurance cancellations could result in a decline in revenue. Under the Homeowners Protection Act and GSE guidelines, coverage terminates automatically at 78% loan-to-value and can be cancelled on request at 80%, so falling rates, refinancing or rapid home price appreciation all shorten the life of the in-force book. Enact's primary persistency rate was 82% in 2025, 83% in 2024 and 85% in 2023.
• Competition, and changes to the GSEs' charters or practices — Competition within the mortgage insurance industry could cost Enact market share, customers, premium levels and underwriting discipline. Separately, changes to the charters or practices of Fannie Mae and Freddie Mac — including any decision to reduce or discontinue the use of mortgage insurance — could adversely affect the business, as could a shift towards alternatives to private mortgage insurance or towards lower coverage levels.
• Credit risk transfer may not be available or affordable — Enact describes its credit risk transfer programme as a material component of its strategy, used to cede risk to highly rated counterparties and capital-markets investors and to manage capital. It discloses that CRT transactions may not be available, affordable or adequate to protect it against losses — and that it may be unable to raise or maintain the capital it needs, in a timely manner or on anticipated terms.
• Genworth's control — Genworth Financial beneficially owns at least 80% of Enact's common stock and can exert significant influence over corporate decisions; while it holds more than 50%, it has the right to nominate a majority of the directors. Enact discloses that Genworth is expected to keep at least 80% to preserve tax consolidation benefits, which may limit Enact's ability to raise capital by issuing common stock to third parties, and that Enact is jointly and severally liable for federal income taxes owed by the Genworth consolidated group for periods in which it is a member.

Los principales clientes representan el 12% de los ingresos

Enact discloses that its largest customer accounted for approximately $145 million, or 12%, of total revenues in 2025 — and 22% of total new insurance written that year, up from 20% in 2024 and 19% in 2023. Its top five customers generated approximately 33% of new insurance written in 2025. No other customer reached 10% of either total revenues or NIW in 2025, 2024 or 2023. The 12% figure is the share of revenue; the filing does not state a revenue share for the top five, only their share of new business. Set against roughly 1,600 customers served in 2025, the base is broad but the top of it is not: one lender supplies more than a fifth of the new business, and Enact says it cannot be certain that business lost from a significant customer would be replaced.