Enact (ACT) Q3 2026 earnings review
Enact raises its payout target, but default costs climb
Enact's mortgage default costs climbed while its core premium revenue barely moved, leaving share buybacks to drive per-share profit growth. The private mortgage insurer's net premiums earned dipped 1% from a year ago as it handed more premiums to reinsurers, while its loss ratio rose to 20% on seasonal missed payments and smaller reserve releases from older loans. Even so, profit per share excluding one-offs rose 6% because buybacks retired 7% of the share count, and chief executive Rohit Gupta lifted the full-year capital return plan to $600 million.
| Net premiums earned | $242.3M −1.0% from a year ago |
|---|---|
| Operating profit per share, excluding one-offs | $1.19 +6.3% from a year ago |
| Loss ratio (claims as % of premiums) | 20% 14% last quarter; 15% a year ago |
| Full-year capital return outlook | Raised to ~$600M prior: $550–600M |
⚖️ Verdict: ⚪ Neutral
The standing case is unchanged because higher buybacks and lower operating costs balanced out the expected climb in mortgage delinquencies. On the positive side, reinsurance commissions and cost control pushed full-year expenses to the bottom of the $205 million to $210 million plan. On the negative side, the refinancing wave that lifted policy writing in the first half faded back to 7% of new volume, and policies written in 2022 through 2024 are entering their peak default years.
The question now is whether rising defaults on 2022–2024 mortgages will eat into profit faster than share buybacks can shrink the share count. One view is that Enact's conservative 8% claim-rate assumption leaves plenty of older reserves to release and cushion the loss ratio; the other is that shrinking releases will expose a mid-30% underlying loss rate. Fourth-quarter reserve releases against last year's $65 million figure will show how fast that cushion is thinning.
🐂 Bull Case
Share Buybacks Lift Per-Share Profit as Total Earnings Dip
Enact is a private mortgage insurer that protects lenders when homebuyers with small down payments default. Because its insurance base is growing slowly, the North Carolina group relies on share buybacks to lift per-share profit, though critics note that about four-fifths of buyback cash goes to controlling parent Genworth Holdings to keep its ownership stake steady.
Management raised its full-year capital return plan again, to roughly $600 million, "reflecting our continued strong financial position and confidence in our business". The insurer spent $118 million to buy back 2.4 million shares in the third quarter and another $57 million through November 3, funded by a $200 million dividend from its main insurance subsidiary.
Those purchases shrank the diluted share count by 6.8% from a year ago, to 138.3 million. That reduction turned a 1% dip in operating profit excluding one-offs into a 6.3% gain in profit per share, to $1.19. By our math, hitting the $600 million target leaves $142 million of payouts for the rest of the fourth quarter.
What to watch: the related-party footnote in the third-quarter filing and next year's buyback authorization. The filing will show how much of the $175 million bought since June went to Genworth rather than open-market holders.
Reinsurance Commissions Help Push Full-Year Costs to Low End
With revenue up less than 1% from a year ago, the mortgage insurer has leaned on cost cuts and underwriting software such as its Ella assistant and Rate 360 pricing tool to protect margins. Acquisition and operating expenses — the cost of selling policies and running the business — fell to $50 million, or 21% of earned premiums, down from $53 million and 22% a year earlier.
Enact said the drop came from "favorable ceding commissions and continued prudent expense management", meaning reinsurers rebated a larger share of costs for taking on policy risk. Management steered its full-year operating expense plan, excluding reorganization charges, to the bottom of its $205 million to $210 million range. The press release gave no new figures on the Ella software.
What to watch: fourth-quarter operating expenses excluding reorganization costs. By our math, hitting the $205 million floor allows $55.9 million in the fourth quarter, which would prove the savings hold even during the seasonal year-end bonus period.
🐻 Bear Case
Aging Mortgage Books and Smaller Reserve Releases Lift Loss Costs
"Enact’s performance this quarter reflects the strength of our business, the commitment of our team and the value we provide to our customers," chief executive Rohit Gupta said. Behind that upbeat summary, the insurer's pre-tax profit margin fell 2.5 percentage points from a year ago because mortgage default costs rose 3.6 percentage points of total revenue.
Every quarter Enact sets aside money for newly missed mortgage payments and releases reserves from older loans that borrowers brought back to current status. In the third quarter, the company released $37 million from older reserves, down from $45 million a year earlier, while new missed payments rose 11% "as newer books progressed on their expected loss development pattern".
- Losses incurred: $47.4 million, up 32% from a year ago and 42% from last quarter
- Reported loss ratio (losses as a share of earned premiums): 20%, up from 15% a year ago
- Loss ratio without reserve releases: 34.8% by our math, up from 28.7% last quarter
- Primary delinquency rate (share of insured loans behind on payments): 2.79%, up from 2.45% a year ago
This matters because the policies written between 2022 and 2024 — which carry smaller home-price gains than earlier loans and now represent 40% of risk in force — are entering the peak years for defaults while the cushion from older reserve releases shrinks.
What to watch: the fourth-quarter reserve release against last year's $65.4 million release, which included a one-time claim-rate cut. A smaller release alongside seasonal winter delinquencies will push reported profit down from a year ago.
Shrinking Policy Counts and Reinsurance Weigh on Premium Revenue
Enact earns most of its revenue by charging monthly premiums on its primary insurance in-force (IIF), the total dollar balance of mortgages it insures. Although that dollar balance rose 1% from a year ago to $275.1 billion on larger average loan sizes, the number of insured policies fell 2% to 934,364.
The company wrote $14.1 billion of new insurance during the quarter, but by our math $13.0 billion of existing coverage ran off through home sales and payoffs, adding just $1.1 billion to the base. Net premiums earned — the premium revenue Enact keeps — slipped 1% to $242.3 million because of "higher ceded premiums from our continued use of quota share reinsurance".
Under quota-share reinsurance, the insurer hands a set percentage of its premiums and future default losses to outside reinsurers to reduce its required regulatory capital. Enact signed a new agreement this quarter to hand off about 35% of a portion of its 2028 policies, up from 27% on its 2026 book, which will keep pressing down on retained premium revenue.
What to watch: the base premium rate in basis points on tomorrow's earnings call. A fifth straight quarterly drop would show that pricing on new policies is not offsetting the rising reinsurance hand-off.
Refinance Share of New Policies Halved as Rates Held Borrowers In
Earlier this year, a pickup in mortgage refinancing gave the insurer a boost in new policy writing. That tailwind reversed over the last two quarters as interest rates kept homeowners locked into their existing loans. About 89% of the mortgages in Enact's portfolio carry interest rates below 7%.
New insurance written fell 7% from the second quarter to $14.1 billion "primarily from lower refinance activity", Enact said. Refinance originations dropped to $943 million, or 7% of new policies, down from $1.91 billion (13%) in the second quarter and $3.00 billion (23%) in the first. That kept persistency — the share of policies that stay on the books over a year — high at 81%.
What to watch: purchase mortgage volume in the fourth quarter, when home buying slows for the winter. With refinancing back to 7% of volume, high mortgage rates leave Enact dependent on a slow home-purchase market for new policies.
Risks this quarter didn't answer
Four standing items in our analysis cannot be read from the earnings release or financial supplement and await the conference call or the quarterly filing.
- Base premium rate: not in the release; the finance chief's remarks on the call will show whether the four-quarter slide past 39.1 basis points stopped.
- Enact Re assumed reinsurance revenue: not separated in the release; the filing's reinsurance footnote will show if it beat the $11.3 million second-quarter pace.
- Return on equity on new policies: withheld by management on prior calls; any commentary on 2026 policy returns versus 2023–2024 would test pricing power.
- New credit-score capital rules: government-sponsored mortgage backers Fannie Mae and Freddie Mac have not set capital rules for VantageScore 4.0 or FICO 10T.
👓 Other Themes
AM Best Upgrades Enact Credit Ratings After Subsidiary Dividend
Credit rating agency AM Best upgraded the financial strength rating of Enact's main insurance subsidiaries to A from A- and raised the holding company's issuer rating to bbb from bbb-, with stable outlooks. During the quarter, the main insurance unit paid a $200 million dividend to the holding company, trimming its excess regulatory capital under Private Mortgage Insurer Eligibility Requirements (PMIERs) to $1.83 billion, or 158% of the required minimum.
💲 Other KPIs
Interest earned on the company's $6.4 billion bond and cash portfolio rose 8.5% from a year ago and 1.7% from last quarter. Reinvesting maturing bonds at higher interest rates lifted the portfolio's average yield to 4.7%, up from 4.6% last quarter and 4.3% a year ago. Enact took $6.0 million of bond sale losses "to recoup losses through higher net investment income".
Net worth per share, excluding unrealized bond market swings (accumulated other comprehensive income), grew 9.9% from a year ago and 2.0% from last quarter on retained profit and share buybacks. Including those unrealized bond losses — which widened to $294.4 million from $83.3 million last quarter — reported book value per share slipped 1.9% from June to $38.30.
Funds set aside to pay future mortgage default claims rose 7.9% from a year ago and 3.1% from last quarter, outpacing flat revenue as total delinquent loans climbed 11.6% to 26,085. The average reserve set aside per delinquent primary loan dipped to $21,300 from $22,200 in both the second quarter and a year ago.
🔮 Guidance
Raised. The insurer lifted its full-year shareholder payout target to the top of its prior range, about $25 million above the old middle point. By our math, after returning $401 million through September and spending $57 million on buybacks through November 3, the plan leaves $142 million for the rest of the year. This is the second raise this year (+$75 million at Q2, +$25 million now).
Lowered cost target. The US group now expects full-year operating costs, excluding reorganization charges, at the bottom of its prior $205 million to $210 million range. By our math, with $149.1 million spent in the first nine months, a $205 million full-year bill leaves $55.9 million for the fourth quarter — up from $49.3 million in Q3 on seasonal compensation, but 5.8% below last year's fourth quarter.
New. The board declared a fourth-quarter dividend of $0.24 per share, payable December 17 to shareholders of record on November 25. That matches the quarterly rate Enact set in the first quarter when it raised the payout by 14% from $0.21, and takes the full-year dividend to $0.96 per share.
❓ Key Questions
Did the base premium rate fall for a fifth quarter?
Management's full-year plan called for the base premium rate to stay roughly even with 2025, yet it fell in each of the prior four quarters to 39.1 basis points. The press release omits the third-quarter figure.
How much did Enact Re contribute to third-quarter premiums?
Enact Re, the unit that participates in mortgage reinsurance deals, earned $11.3 million in the second quarter. The release does not break out its third-quarter revenue or profit, which investors need to judge whether it can offset flat primary premiums.
What accounts for the $211 million drop in bond marks?
Unrealized losses in accumulated other comprehensive income widened to $294.4 million from $83.3 million in June, cutting reported book value per share by $0.76 despite strong earnings. The release does not explain which securities drove that swing.
How much of the recent buyback went to Genworth?
Enact bought back $118 million of stock in the third quarter and $57 million through November 3. Under its ownership-maintenance agreement, about 81% of buyback cash typically goes to controlling parent Genworth rather than reducing the public share float.