Enact Holdings (ACT) Q2 2026 earnings review
Strong NIW Growth and Higher Investment Yields Fuel Capital Return Upgrade
Enact Holdings reported a solid Q2 2026, proving the resilience of its mortgage insurance model despite a volatile housing market. The company delivered $175M in Net Income (+4% YoY), primarily supported by a 15% surge in New Insurance Written (NIW) to $15.2B and accelerating Net Investment Income (+11% YoY). While core underwriting loss margins slightly deteriorated—the loss ratio crept to 14% from 10% a year ago—robust overall cash generation gave management the confidence to hike FY2026 capital return guidance to $550M-$600M. The stock should respond positively to the raised shareholder return floor and record $274B Insurance In-Force (IIF).
🐂 Bull Case
Management raised full-year capital return guidance to $550M-$600M, up from the prior ~$500M target, underpinned by robust PMIERs sufficiency (161%) and strong operating cash flows.
New Insurance Written surged 19% sequentially and 15% YoY to $15.2B, a clear acceleration that defies broader macro housing origination weakness, driving IIF to a record $274B.
🐻 Bear Case
The loss ratio widened to 14% from 10% a year ago. Total primary delinquencies are up 10% YoY, signaling that portfolio seasoning is beginning to bite into core underwriting profitability.
Persistency dropped to 80% from 82% a year ago. If mortgage rates continue to ease, faster prepayments will erode the highly profitable seasoned book.
⚖️ Verdict: 🟢
Bullish. Enact's core engine is humming: NIW is accelerating, investment yields are compounding, and excess capital is flowing directly to shareholders. The slight uptick in delinquencies is an expected normalization rather than a structural crisis.
Key Themes
New Insurance Written (NIW) Accelerating
Despite a tough housing affordability environment, Enact delivered a blowout quarter for originations. NIW grew 15% YoY to $15.2B, heavily skewed toward purchase originations (87%). This acceleration proves Enact's dynamic 'Rate 360' pricing strategy is successfully capturing volume while maintaining a 754 weighted-average credit score on the new book.
Investment Income Driving the Bottom Line
Net Investment Income is becoming a more prominent driver of Enact's earnings, hitting $73.2M (+11% YoY). The portfolio yield continues an accelerating upward trend as legacy bonds roll off and are reinvested at higher current market rates. This provides a durable, recurring earnings stream that insulates the bottom line from underwriting volatility.
Loss Ratio and Delinquencies Creeping Higher
While overall earnings grew, the underlying underwriting quality shows signs of normalization. The Loss Ratio ticked up to 14% (from 10% in 25Q2). Total primary delinquencies sit at 24,330—up 10% from 22,118 a year ago. The primary delinquency rate rose to 2.59% (vs 2.32% in 25Q2). The narrative of 'pristine credit' is slowly contradicting the data showing gradual deterioration in newer vintages.
Macro Persistency Pressures Stabilize
Persistency—the rate at which policies remain in force—held stable sequentially at 80%, but is down from 82% in 25Q2. With roughly 12% of the portfolio sitting at least 50 bps above the June 2026 average mortgage rate of 6.5%, the company faces ongoing refinancing risk if the Fed cuts rates aggressively. Lower persistency would decelerate IIF growth and limit future premium earnings.
Capital Return Pipeline Upgraded
The Board declared a $0.24 quarterly dividend and repurchased 2.2 million shares for $93M during Q2. Crucially, management raised the total FY26 capital return guidance range to $550M-$600M. The holding company's liquidity position ($661M in cash/invested assets) and PMIERs sufficiency ($1.89B buffer) comfortably support this accelerating return of capital.
Expense Creep and One-Time Charges
Operating expenses were $52M, pushing the expense ratio to 21% (up from 20% in 26Q1). Management noted this was partially driven by $1M in one-time reorganization costs. While minor, maintaining flat operating expenses is a core pillar of their operating leverage narrative; any structural increase here poses a risk to margins.
Other KPIs
Stable/Accelerating. Up 1% sequentially and 2% YoY, establishing a new record. This metric serves as the foundation for future recurring premium revenue. The growth was achieved despite persistency dropping YoY, highlighting the sheer strength of the $15.2B in NIW added during the quarter.
Stable. The buffer over required assets sits at approximately $1.89 billion. While down slightly from 165% ($1.96B buffer) in 25Q2 due to aggressive share repurchases and dividends, it remains highly robust. This massive cushion is what enables the company to safely raise its shareholder return guidance.
Stable. Flat YoY ($245.3M in 25Q2) and up slightly from $242.8M in 26Q1. This stagnation in top-line premium revenue, despite a growing IIF portfolio, highlights the drag caused by higher ceded premiums from ongoing Credit Risk Transfer (CRT) agreements, offset only by the larger volume base.
Guidance
Accelerating. Upgraded from the prior expectation of approximately $500 million. This implies a massive H2 2026 run rate for buybacks, given that the company returned $123M in Q1 and ~$127M in Q2 (total $250M YTD). Reaching the midpoint ($575M) requires returning roughly $325M over the next two quarters.
Key Questions
Underwriting Margin Contraction
Losses incurred jumped to $33.2M from $25.2M a year ago. Is this purely an expected seasoning of the 2022-2024 vintages, or are you seeing structural geographic weaknesses (e.g., Florida/Texas) triggering higher severity claims?
VantageScore 4.0 Implementation
With FHFA pushing VantageScore 4.0, how is the GSE PMIERs capital framework evolving? Does the transition threaten to increase your required asset levels if the new scoring models alter the perceived risk of your legacy FICO-based book?
Base Premium Rate Pressures
Net premiums earned have flatlined YoY despite record IIF levels. How much of this is driven by competitive pricing pressures versus the structural cost of your Credit Risk Transfer (CRT) reinsurance programs?
Pacing of Increased Capital Returns
With the guidance raised to $550M-$600M, and ~$250M executed in H1, how should we think about the split between programmatic share repurchases versus potential special dividends in H2?