Enact Holdings (ACT) Q1 2026 earnings review
New Volume Surges While Capital Returns Shield Normalizing Credit Costs
Enact delivered a rock-solid start to 2026, though the mechanics driving its profitability are shifting. While New Insurance Written (NIW) surged 30% YoY, Net Income remained relatively flat at $168 million. The culprit? The massive tailwind from historical reserve releases is beginning to normalize, driving the Loss Ratio up to 15% (from 7% last quarter). Management is aggressively countering flat earnings by flexing their balance sheet: executing $93 million in buybacks, hiking the dividend by 14%, and relying on a massive $1.9 billion excess PMIERs capital buffer. Operationally, the company remains highly efficient, driving its expense ratio down to a stellar 20%.
🐂 Bull Case
With a 162% PMIERs sufficiency ratio, Enact is aggressively shrinking its float. A 14% dividend hike and the ongoing execution of a $500 million repurchase authorization provide a massive EPS tailwind.
New Insurance Written (NIW) jumped 30% year-over-year, snapping previous deceleration trends and indicating a revitalized purchase origination market despite broader affordability concerns.
🐻 Bear Case
The loss ratio doubled sequentially to 15% as net reserve releases shrank to $39 million (down from $60 million in 25Q4). If cure rates slow further, baseline losses will begin to drag on operating income.
Despite the 30% YoY surge in NIW, Primary Insurance In-Force actually shrank slightly sequentially to $272 billion. A persistency rate stuck at 80% is capping the total portfolio's growth.
⚖️ Verdict: ⚪
Neutral-Bullish. Excellent operational execution and immense capital returns provide a high floor for the stock. However, a normalizing loss ratio and a stagnating in-force portfolio limit top-line revenue growth.
Key Themes
New Insurance Written (NIW) Acceleration
Following quarters of muted origination volume, NIW accelerated sharply, growing 30% YoY to $12.8 billion. The mix remains highly attractive, comprised of 96% monthly premium policies and 77% purchase originations. This signals that Enact is capturing significant share among resilient home buyers.
Relentless Expense Discipline
Operating expenses fell to $49 million (from $59 million sequentially and $53 million a year ago), driven by lower incentive-based compensation. This pushed the expense ratio down to a highly efficient 20%, demonstrating excellent operating leverage as top-line volume scales.
Aggressive Capital Returns Shield EPS
Capital allocation is the standout driver. In Q1 alone, the company executed $93 million in buybacks and completed its prior $350 million authorization. With $438 million remaining on its new $500 million program and a 14% dividend increase just declared, Enact is systematically retiring equity to offset flat net income growth.
Loss Ratio Normalization
A clear break in trend: The loss ratio jumped to 15%, up from 7% in 25Q4 and 12% in 25Q1. This was primarily driven by a smaller net reserve release ($39 million vs. $60 million in 25Q4). While still healthy, the era of massive reserve releases suppressing the loss ratio appears to be winding down, establishing a new, higher baseline for operating costs.
Portfolio Growth Stalls Despite Volume Jump
A crucial contradiction to the positive NIW narrative: Primary Insurance In-Force (IIF) slightly declined from $273 billion in 25Q4 to $272 billion in 26Q1. This stagnation is due to a primary persistency rate that has decelerated and plateaued at 80% (down from 84% a year ago), meaning runoff is outpacing the 30% jump in new volume.
Macro Volatility and Rate360 Pricing Engine
Management highlighted ongoing mortgage rate volatility and housing affordability as key macro factors shaping activity. Approximately 21% of the portfolio now sits at least 50 basis points above the March average rate of 6.2%. To navigate this, the company is relying heavily on its Rate360 proprietary pricing engine to adjust dynamically for regional risk attributes rather than blindly chasing market share.
Other KPIs
Accelerating. Up sequentially from $69 million in 25Q4 and up significantly from $63 million a year ago. The sustained high-interest-rate environment continues to benefit the company as it reinvests portfolio cash flows into higher-yielding fixed maturity assets.
Stable. The company continues to operate with a fortress balance sheet, holding $1.9 billion in available assets above the PMIERs regulatory requirement. This ratio remains identical to 25Q4, proving that aggressive buybacks are not compromising the regulatory cushion.
Guidance
Stable. Carried over from 25Q4 management commentary, the company is targeting roughly $500 million in total capital returns (dividends + buybacks) for the year. The strong start in Q1 ($93M buybacks + $30M dividends) puts them exactly on pace to achieve this aggressive target.
Stable. Implied from the Q4 call, maintaining a flat expense base while growing premiums is expected to improve the expense ratio and drive operating leverage. The $49 million result in Q1 suggests they are pacing well below the midpoint of this annual range.
Key Questions
Bridge to Normalized Loss Ratio
With the net reserve release shrinking to $39 million this quarter, what does management view as the ultimate normalized, run-rate loss ratio once prior-year cures fully wash out?
Persistency Floor
Persistency has stalled at 80% and capped Insurance In-Force growth. At what average market mortgage rate does the company expect persistency to dip into the 70s, and how is Rate360 pricing for that potential runoff?
Capital Buffer Philosophy
With PMIERs sufficiency at a robust 162% ($1.9B excess), what is the minimum threshold the Board is comfortable managing down to before scaling back the aggressive share repurchase program?