Enact Holdings Inc

Previous wording

We are a leading private mortgage insurance company, having served the United States housing finance market since 1981, and operate in all 50 states and the District of Columbia. Our mortgage insurance products provide credit protection to mortgage lenders, covering a portion of the unpaid principal balance of Low Down Payment Loans in the event of a default. We believe we have built a leading platform based on long-tenured customer relationships, underwriting excellence and prudent risk and capital management practices. Our business objective is to leverage our competitive strengths to drive market share, maintain our strong capitalization and strong earnings profile and deliver attractive risk-adjusted returns to our stockholders.

Current wording

We are a leading private mortgage insurance company, having served the United States housing finance market since 1981, and operate in all 50 states and the District of Columbia. Our mortgage insurance products provide credit protection to mortgage lenders, covering a portion of the unpaid principal balance of Low Down Payment Loans in the event of a default. Our business objective is to leverage our competitive strengths to drive market share, maintain our strong capitalization and strong earnings profile and deliver attractive risk-adjusted returns to our stockholders. We also offer mortgage-related insurance and reinsurance through our wholly owned Bermuda-based subsidiary, Enact Re.

Previous wording

We generate revenues by providing mortgage credit protection to our customers in exchange for premiums, which we set based on our evaluation of the underlying risk we insure. Once the premium rate is established and coverage is activated, the premium rate remains unchanged for the first ten years of the policy; thereafter the premium rate resets to a lower rate used for the remaining life of the policy. In general, we can only cancel coverage for a failure to pay premiums or at servicer direction when the borrowers achieve the required amount of home equity. Our premium rate is applied predominantly to the original loan balance to determine either a monthly payment that the lender adds to the borrower’s monthly loan payment or a single upfront payment made by either the borrower or lender at loan closing. The amount of premiums earned from our insurance portfolio and the timing of premium recognition are also affected by persistency rate, which we measure as the percentage of loans that remain on our books based on the annualized cancellations for the period.

Current wording

We primarily generate revenues by providing mortgage credit protection to our customers in exchange for premiums, which we set based on our evaluation of the underlying risk we insure. Once the premium rate is established and coverage is activated, the premium rate remains unchanged for the first ten years of the policy; thereafter the premium rate resets to a lower rate used for the remaining life of the policy. In general, we can only cancel coverage for a failure to pay premiums or at servicer direction when the borrowers achieve the required amount of home equity. Our premium rate is applied predominantly to the original loan balance to determine either a monthly payment that the lender adds to the borrower’s monthly loan payment or a single upfront payment made by either the borrower or lender at loan closing. The amount of premiums earned from our insurance portfolio and the timing of premium recognition are also affected by persistency rate, which we measure as the percentage of loans that remain on our books based on the annualized cancellations for the period.

Previous wording

The level of private mortgage insurance market penetration (“market penetration”) and eventual market size is affected in part by actions taken by the GSEs and the United States government, including the FHA, the FHFA and Congress, that impact housing or housing finance policy. In the past, these actions have included announced changes, or potential changes, to underwriting standards, FHA pricing, GSE guaranty fees and loan limits, as well as low down payment programs available through the FHA or GSEs.

Current wording

The level of private mortgage insurance market penetration and eventual market size is affected in part by actions taken by the GSEs and the United States government, including the FHA, the FHFA and Congress, that impact housing or housing finance policy. In the past, these actions have included announced changes, or potential changes, to underwriting standards, FHA pricing, GSE guaranty fees and loan limits, as well as low down payment programs available through the FHA or GSEs.

Previous wording

Pricing is highly competitive in the mortgage insurance industry, with industry participants competing for market share, customer relationships and overall value. Recent pricing trends have introduced an increasing number of loan, borrower, lender and property attributes, resulting in expanded granularity in pricing regimes and a shift from traditional published rate cards to dynamic pricing engines that better align price and risk. Our proprietary risk-based pricing engine evaluates returns and volatility under both the PMIERs capital framework and our internal economic capital framework, which is sensitive to economic cycles and current housing market conditions. The model assesses the performance of new business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility.

Current wording

Pricing is highly competitive in the mortgage insurance industry, with industry participants competing for market share, customer relationships and overall value. Pricing trends have introduced an increasing number of loan, borrower, lender and property attributes, resulting in expanded granularity in pricing regimes in order to better align price and risk. Our proprietary risk-based pricing engine evaluates returns and volatility under both the PMIERs capital framework and our internal economic capital framework, which is sensitive to economic cycles and current housing market conditions. The model assesses the performance of new business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility.

Previous wording

Consistent with the seasonality of home sales, purchase mortgage origination volumes typically increase in late spring and peak during summer months, leading to a rise in NIW volume during the second and third quarters of a given year. Refinancing volume, however, does not follow a similar seasonal trend and instead is primarily influenced by interest rates, which can overwhelm typical seasonal trends. Delinquency performance (new delinquency formation and cure behavior) is generally favorable in the first and second quarters of the year. Therefore, we typically experience lower levels of losses resulting from favorable delinquency activity in the first and second quarters, as typically compared to the third and fourth quarters. As a result of delinquencies from COVID-19 and subsequent cure activity, including the impact of forbearance policies on delinquency recognition and performance recent trends may not follow traditional seasonality.

Current wording

Consistent with the seasonality of home sales, purchase mortgage origination volumes typically increase in late spring and peak during summer months, leading to a rise in NIW volume during the second and third quarters of a given year. Refinancing volume, however, does not follow a similar seasonal trend and instead is primarily influenced by interest rates, which can overwhelm typical seasonal trends. Delinquency performance (new delinquency formation and cure behavior) is generally favorable in the first and second quarters of the year. Therefore, we typically experience lower levels of losses resulting from favorable delinquency activity in the first and second quarters, as compared to the third and fourth quarters.

Previous wording

The percentage of our IIF that remains insured after taking into account annualized cancellations for the period presented is defined as our persistency rate. Because our insurance premiums are earned over the life of a policy, higher or lower persistency rates can have a significant impact on our profitability. The rise of interest rates throughout 2022 and 2023 has significantly increased persistency in the portfolio, but this impact is partially offset by lower NIW.

Current wording

The percentage of our IIF that remains insured after taking into account annualized cancellations for the period presented is defined as our persistency rate. Because our insurance premiums are earned over the life of a policy, higher or lower persistency rates can have a significant impact on our profitability. Recent elevated interest rates have increased persistency in the portfolio, but this impact is partially offset by lower NIW.

Previous wording

In contrast to monthly premium policies, when single premium policies are cancelled by the insured because the loan has been paid off or otherwise, any remaining unearned premiums are earned at cancellation. Although these cancellations reduce IIF, assuming all other factors remain constant, the profitability of our single premium business increases when persistency rates are lower. As of

Current wording

In contrast to monthly premium policies, when single premium policies are cancelled by the insured because the loan has been paid off or otherwise, any remaining unearned premiums are earned at cancellation. Although these cancellations reduce IIF, assuming all other factors remain constant, the profitability of our single premium business increases when persistency rates are lower. Our concentration of single premium policies has declined in recent years, as a result of elevated interest rates. As of December 31, 2024 and 2023, single premium policies comprised 9% and 10% of primary IIF, respectively.

Previous wording

Improved analytics, stronger loan origination quality controls and the regulatory implementation of the QM Rule have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time. Additionally, private mortgage insurers and the GSEs have maintained strong credit standards over the past decade, with average FICO scores for NIW persisting at levels significantly above historical averages. As a result, the industry is insuring loans from borrowers who should be better positioned to meet their mortgage obligations. More recently, in response to FTHB demand, there has been modest credit expansion that accommodates LTV over 95% and higher DTI ratios. Even after this expansion, private mortgage insurers and the GSEs have maintained strong credit standards well above historical norms.

Current wording

Improved analytics, stronger loan origination quality controls and the regulatory developments have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time. Additionally, private mortgage insurers and the GSEs have maintained strong credit standards over the past decade, with average FICO scores for NIW persisting at levels significantly above historical averages. As a result, the industry is insuring loans from borrowers who should be better positioned to meet their mortgage obligations.

Previous wording

•legislative, regulatory, FHFA or GSE action, or executive orders permitting or mandating forbearance or a moratorium on foreclosures or evictions due to events such as natural disasters or COVID-19;

Current wording

•legislative, regulatory, FHFA or GSE action, or executive orders permitting or mandating forbearance or a moratorium on foreclosures or evictions due to events such as natural disasters or a pandemic (e.g. COVID-19);

Previous wording

We use CRT transactions to transfer a portion of our risk to third parties, through traditional XOL and quota share reinsurance and the issuance of ILNs. Our CRT program reduces the volatility of our in-force portfolio and provides capital relief under PMIERs. When we enter into a CRT transaction, the reinsurer receives a premium and, in exchange, insures an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums but also provide capital relief under PMIERs in exchange for a negotiated ceded premium rate. Under certain stress scenarios, our incurred losses are also reduced by any incurred losses ceded in accordance with our reinsurance agreements.

Current wording

We use CRT transactions to transfer a portion of our risk to third parties, through traditional XOL and quota share reinsurance and the issuance of ILNs. Our CRT program reduces the volatility of our in-force portfolio and provides capital relief under PMIERs. When we enter into a CRT transaction, the reinsurer receives a premium and, in exchange, insures an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums and incurred losses, but also provide capital relief under PMIERs.

Previous wording

Loss reserves represents the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the end of the respective reporting period. The estimated liability includes requirements for future payments of: (a) losses that have been reported to the insurer; (b) losses related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated; and (c) LAE. Loss adjustment expenses include costs incurred in the claim settlement process such as legal fees and costs to record, process and adjust claims. Consistent with U.S. GAAP and industry accounting practices, we do not establish loss reserves for future claims on insured loans that are not in default or believed to be in default.

Current wording

Loss reserves represent the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the end of the respective reporting period. The estimated liability includes requirements for future payments of: (a) losses that have been reported to the insurer; (b) losses related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated; and (c) LAE. Loss adjustment expenses include costs incurred in the claim settlement process such as legal fees and costs to record, process and adjust claims. Consistent with U.S. GAAP and industry accounting practices, we do not establish loss reserves for future claims on insured loans that are not in default or believed to be in default.

Previous wording

Loss reserves as of December 31, 2023, were $518 million, a decrease of $1 million since December 31, 2022. In considering the potential sensitivity of the factors underlying management’s best estimate of our loss reserve, it is possible that even a relatively small change in the estimated claim and severity rates could have a significant impact on loss reserves and, correspondingly, on results of operations. For example, based on our actual experience during the three-year period immediately preceding December 31, 2023, a change of 5 percentage points, or 15%, in the average claim rate would change the gross loss reserve amount for such quarter by approximately $75 million. Likewise, a change of 4 percentage points, or a change of 4%, in the average severity rate would change the gross loss reserve amount for such quarter by approximately $19 million.

Current wording

Loss reserves as of December 31, 2024, were $525 million, an increase of $7 million since December 31, 2023. In considering the potential sensitivity of the factors underlying management’s best estimate of our loss reserve, it is possible that even a relatively small change in the estimated claim and severity rates could have a significant impact on loss reserves and, correspondingly, on results of operations. For example, based on our actual experience during the three-year period immediately preceding December 31, 2024, a change of 4 percentage points, or 15%, in the average claim rate would change the gross loss reserve amount for such quarter by approximately $72 million. Likewise, a change of 3 percentage points, or a change of 3%, in the average severity rate would change the gross loss reserve amount for such quarter by approximately $15 million.

Previous wording

Our portfolio of fixed maturity securities was valued at $5,266 million as of December 31, 2023, an increase of $381 million from December 31, 2022.

Current wording

Our portfolio of fixed maturity securities was valued at $5,625 million as of December 31, 2024, an increase of $359 million from December 31, 2023.

Previous wording

The majority of our insurance contracts have recurring monthly premiums. We recognize recurring premiums over the terms of the related insurance policy on a pro-rata basis. Premiums written on single premium policies and annual premium policies are initially deferred as unearned premium reserve and earned over the policy life. A portion of the revenue from single premium policies is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy. If single premium policies are cancelled and the premium is non-refundable, then the remaining unearned premium related to each cancelled policy is recognized to earned premiums upon notification of the cancellation. For borrower-paid mortgage insurance, coverage ceases at the earlier of prepayment, or when the original principal is amortized to a 78% loan-to-value ratio in accordance with the Homeowners Protection Act of 1998. Variation in cancellation rates and projected losses are inputs into our premium recognition models, causing uncertainty within our estimates.

Current wording

The majority of our insurance contracts have recurring monthly premiums. We recognize recurring premiums over the terms of the related insurance policy on a pro-rata basis. Premiums written on single premium policies and annual premium policies are initially deferred as unearned premium reserve and earned over the policy life. A portion of the revenue from single premium policies is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy. If single premium policies are cancelled and the premium is non-refundable, then the remaining unearned premium related to each cancelled policy is recognized to earned premiums upon notification of the cancellation. For borrower-paid mortgage insurance, coverage ceases at the earlier of prepayment, or when the original principal is amortized to a 78% loan-to-value ratio in accordance with HOPA. Variation in cancellation rates and projected losses are inputs into our premium recognition models, causing uncertainty within our estimates.

Previous wording

Unearned premium was $149 million as of December 31, 2023, a decrease of $53 million compared to December 31, 2022. Changes in market conditions could cause a decline in mortgage originations, mortgage insurance penetration rates, persistency and our market share, all of which could impact new insurance written. For example, a decline in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately $4 million in the first full year. Likewise, if primary persistency rates declined on our existing insurance in-force by 10%, earned premiums would decline by approximately $96 million during the first full year, partially offset by higher policy cancellations in our single premium products. These reductions in earned premiums could be potentially offset by lower reserves due to policies no longer being in-force.

Current wording

Unearned premiums were $115 million as of December 31, 2024, a decrease of $35 million compared to December 31, 2023. Changes in market conditions could cause a decline in mortgage originations, mortgage insurance penetration rates, persistency and our market share, all of which could impact new insurance written. For example, a decline in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately $4 million in the first full year. Likewise, if primary persistency rates declined on our existing insurance in-force by 10%, earned premiums would decline by approximately $95 million during the first full year, partially offset by higher policy cancellations in our single premium products. These reductions in earned premiums could be potentially offset by lower reserves due to policies no longer being in-force.

Previous wording

Macroeconomic environment. During 2023, the United States economy faced uncertainty due to continued but lessening inflationary pressure, the geopolitical environment and persistent concerns around a possible recession.

Current wording

Macroeconomic environment. During 2024, the United States economy continued to show positive signs, but faced lingering uncertainty due to inflationary pressure, the geopolitical environment and other macroeconomic concerns.

Previous wording

Inflationary pressures have moderated in 2023, with the Bureau of Labor Statistics reporting in December that the Consumer Price Index was down to 3.4% year-over-year. The Federal Reserve has taken an aggressive approach towards addressing inflation through interest rate increases and a reduction of its balance sheet. The Federal Reserve raised rates four times in 2023 following seven interest rate increases in 2022. Mortgage rates continued to rise and reached more than 20-year highs during 2023.

Current wording

Inflationary pressures moderated in 2024, with the Bureau of Labor Statistics reporting in December that Consumer Price Index inflation was 2.9% year-over-year. The Federal Reserve took an aggressive approach towards addressing inflation with policy rates reaching a cyclical peak in July 2023. The Federal Open Market Committee began to lower policy rates in September 2024 with additional reductions in November and December 2024. Mortgage rates remain elevated but have declined compared to highs in late 2023.

Previous wording

Mortgage origination activity remained slow during 2023 in response to elevated mortgage rates and sustained low housing supply. Housing affordability continued to deteriorate due to high interest rates and elevated home prices, only marginally offset by rising median family income according to the National Association of Realtors Housing Affordability Index. National housing prices rose modestly throughout 2023, according to the FHFA Monthly Purchase-Only House Price Index.

Current wording

Mortgage origination activity increased modestly in 2024 but remained relatively slow in response to elevated mortgage rates and sustained low housing supply. Over the past few years, housing affordability deteriorated as elevated mortgage rates and home price appreciation outpaced median family income according to the National Association of Realtors Housing Affordability Index. National house prices continued to rise in 2024 according to the Federal Housing Finance Agency (“FHFA”) Monthly Purchase-Only House Price Index.

Previous wording

The unemployment rate was 3.7% as of December 2023 compared to 3.5% in December 2022. As of December 31, 2023, the number of unemployed Americans stands at approximately 6.3 million and the number of long term unemployed over 26 weeks was approximately 1.2 million. Both metrics remain relatively in line with February 2020 levels.

Current wording

The unemployment rate was 4.1% as of December 31, 2024, compared to 3.7% in December 2023. As of December 31, 2024, the number of unemployed Americans was approximately 6.9 million and the number of long term unemployed over 26 weeks was approximately 1.6 million.

Previous wording

Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer-reported forbearances have generally declined. As of December 31, 2023, approximately 1.2%, or 11,536, of our active primary policies were reported in a forbearance plan, of which approximately 31% were reported as delinquent.

Current wording

Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer-reported forbearances have generally declined. As of December 31, 2024, approximately 1.1%, or 10,943, of our active primary policies were reported in a forbearance plan, of which approximately 34% were reported as delinquent. Approximately 9% of our primary new delinquencies in 2024 were subject to a forbearance plan as compared to 13% in 2023.

Previous wording

Private mortgage insurance market penetration and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the Federal Housing Administration and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products.

Current wording

Regulatory developments. Private mortgage insurance market penetration and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the Federal Housing Administration (“FHA”) and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products.

Previous wording

On October 24, 2022, the FHFA announced two initiatives: 1) targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain borrowers and affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans; and 2) the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by the GSEs as well as changing the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies and instead only requiring credit reports from two of the three nationwide credit reporting agencies.

Current wording

On October 24, 2022, the FHFA announced the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for anticipated use by the GSEs as well as proposing to change the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies and instead only requiring credit reports from two of the three nationwide credit reporting agencies. The validation of the new credit scores is currently expected to require lenders to deliver both credit scores for each loan sold to the GSEs. Implementation, which has been delayed beyond 2025, will require system and process updates along with coordination across stakeholders of the industry.

Previous wording

Our primary persistency rate increased to 85% during 2023 compared to 80% during 2022. The increase in persistency was primarily driven by a decline in the percentage of our in-force policies with mortgage rates above current mortgage rates. Elevated persistency has continued to offset the decline in new insurance written, leading to an increase in primary insurance in-force of $14.7 billion or 6% since December 31, 2022.

Current wording

Our portfolio. New insurance written of $51.0 billion in 2024 decreased 4% compared to 2023. Changes in NIW are primarily impacted by the size of the mortgage insurance market and our market share. Our primary persistency rate decreased to 83% during 2024 compared to 85% during 2023. Persistency remains elevated due to high interest rates but decreased in 2024 due to rate volatility throughout the year. Elevated persistency has continued to offset the decline in new insurance written, leading to an increase in primary insurance in-force of $5.9 billion or 2% since December 31, 2023.

Previous wording

Our largest customer accounted for 19% of total NIW and 10% of our total revenues for the year ended December 31, 2023. No other customer accounted for 10% or more of total revenues or NIW for the year ended December 31, 2023. This customer also accounted for 18% and 14% of our total NIW during the years ended December 31, 2022 and 2021, respectively. No customer accounted for more than 10% of our total revenues and no other customer accounted for more than 10% of NIW for the years ended December 31, 2022 or 2021.

Current wording

Our largest customer accounted for 11% and 10% of our total revenues for the years ended December 31, 2024 and 2023, respectively. This customer also accounted for 20%, 19% and 18% of our total NIW during the years ended December 31, 2024, 2023 and 2022, respectively. No other customer accounted for 10% or more of total revenues or NIW for the years ended December 31, 2024 or 2023. No customer accounted for more than 10% of our total revenues and no other customer accounted for more than 10% of NIW for the year ended December 31, 2022.

Previous wording

Loss experience. Our loss ratio for the year ended December 31, 2023, was 3% as compared to (10)% for the year ended December 31, 2022. Both periods were impacted by favorable reserve adjustments. In 2023, we released $241 million of reserves primarily on delinquencies from prior years, related to favorable cure performance on delinquencies from 2022 and earlier, including a portion of those as a result of COVID-19. During the peak of COVID-19, we experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have continued to cure at levels above our reserve expectations. Another component of the reserve release related to delinquencies from 2022, as uncertainty in the economic environment has not negatively impacted cure performance to the extent initially expected. This compares to 2022, where we recorded $314 million of reserve release primarily related to cure performance of 2020 delinquencies. Losses during 2022 were also impacted by $46 million of reserve strengthening related to current accident year delinquencies due to uncertainty in the economic environment.

Current wording

Loss experience. Our loss ratio for the year ended December 31, 2024, was 4% as compared to 3% for the year ended December 31, 2023. Both periods were impacted by favorable reserve adjustments. In 2024, we recorded a reserve release of $252 million, primarily on prior accident year reserves as a result of strong cure performance and loss mitigation efforts. As part of the 2024 reserve adjustments, we decreased our claim rate assumptions for new and existing delinquencies as a result of sustained favorable cure performance and lessening uncertainty in the economic environment, which impacted reserves from current and prior accident years. During 2023, we released reserves of $241 million primarily due to better than expected cure experience on delinquencies from 2022 and earlier, including a portion of those related to the emergence of COVID-19.

Previous wording

The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated, in part, by embedded home price appreciation. For loans insured on or after October 1, 2014, our mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

Current wording

The severity of loss on loans that go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated, in part, by embedded home price appreciation. For loans insured on or after October 1, 2014, our mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

Previous wording

New delinquencies in 2023 increased compared to 2022 primarily due to the aging of large, new books of business. Current period primary delinquencies of 41,617 contributed $265 million of loss expense in 2023. We incurred $171 million of losses from 35,996 current period delinquencies in 2022. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions. Approximately 13% of our primary new delinquencies in 2023 were subject to a forbearance plan as compared to 21% in 2022. Due to the declining number of new delinquencies in forbearance, we no longer differentiate the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance.

Current wording

New delinquencies in 2024 increased compared to 2023 primarily due to the aging of large, newer books of business. Current period primary delinquencies of 48,537 contributed $287 million of loss expense in 2024. We incurred $265 million of losses from 41,617 current period delinquencies in 2023. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions.

Previous wording

Capital requirements and ratings. EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 11.6:1 as of December 31, 2023 and 12.9:1 as of December 31, 2022. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Current wording

Capital requirements and ratings. EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 10.5:1 as of December 31, 2024, and 11.6:1 as of December 31, 2023. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Previous wording

As of December 31, 2023, we had estimated available assets of $5,006 million against $3,119 million net required assets under PMIERs compared to available assets of $5,206 million against $3,156 million net required assets as of December 31, 2022. The sufficiency ratio as of December 31, 2023, was 161% or $1,887 million above the PMIERs requirements, compared to 165% or $2,050 million above the published PMIERs requirements as of December 31, 2022. Our PMIERs required assets benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $73 million of benefit to our December 31, 2023, PMIERs required assets compared to $132 million of benefit as of December 31, 2022. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier. Our PMIERs required assets also benefited from a reinsurance credit of $1,714 million and $1,578 million related to third-party reinsurance as of December 31, 2023, and 2022, respectively.

Current wording

As of December 31, 2024, we had estimated available assets of $5,095 million against $3,043 million net required assets under PMIERs compared to available assets of $5,006 million against $3,119 million net required assets as of December 31, 2023. The sufficiency ratio as of December 31, 2024, was 167% or $2,052 million above the PMIERs requirements, compared to 161% or $1,887 million above the PMIERs requirements as of December 31, 2023. Our PMIERs required assets benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $28 million of benefit to our December 31, 2024, PMIERs required assets compared to $73 million of benefit as of December 31, 2023. Our PMIERs required assets also benefited from a reinsurance credit of $1,885 million and $1,714 million related to third-party reinsurance as of December 31, 2024 and 2023, respectively. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier. Per guidance released by the GSEs in the third quarter of 2024, use of the multiplier will be discontinued effective March 31, 2025.

Previous wording

On February 16, 2023, S&P Global Ratings upgraded the long-term financial strength and issuer credit ratings of EMICO from BBB to BBB+. This rating was further upgraded to A- as of January 8, 2024. Moody’s Investors Service also upgraded the insurance financial strength rating of EMICO from Baa1 to A3 on March 1, 2023. On April 25, 2023, Fitch upgraded the insurance financial strength rating of EMICO from BBB+ to A-. These ratings reflect our continued strong performance including our credit profile, market position, profitability, capital adequacy and financial flexibility.

Current wording

On January 8, 2024, S&P Global Ratings upgraded the long-term financial strength and issuer credit ratings of EMICO from BBB+ to A-.

Previous wording

Recent transactions. In May 2023, we contributed $250 million into Enact Re, our wholly owned Bermuda-based subsidiary. Through this contribution, Enact Re was able to participate in the assumption of excess-of-loss reinsurance relating to GSE credit risk transfer and reinsured EMICO’s new and existing insurance in-force under quota share reinsurance agreements. We contributed an additional $250 million in November 2023 which will support an increase to the ceding percentage of our previously announced affiliate quota share agreements from 7.5% to 12.5%, along with assumed new insurance written and new business opportunities, including the continued execution of GSE credit risk transfer.

Current wording

Recent transactions. In November 2023, we contributed $250 million into Enact Re, our wholly owned Bermuda-based subsidiary. This contribution supported the increase to the ceding percentage of our previously announced affiliate quota share agreements from 7.5% to 12.5% during the first quarter of 2024, and a new quota share reinsurance agreement that cedes 12.5% of EMICO’s 2024 new insurance written. The contribution also supports new business opportunities, which primarily includes the continued execution of GSE credit risk transfer.

Previous wording

Subsequent to year end, on January 3, 2024, we entered into a quota share reinsurance agreement with a panel of third-party reinsurers. Under the agreement, Enact will cede approximately 21% of a portion of its new insurance written from January 1, 2024, though December 31, 2024.

Current wording

On January 3, 2024, we entered into a quota share reinsurance agreement with a panel of third-party reinsurers. Under the agreement, EMICO will cede approximately 21% of a portion of its new insurance written from January 1, 2024, through December 31, 2024.

Previous wording

On March 8, 2023, we executed an excess-of-loss reinsurance transaction with a panel of reinsurers, which provides up to $180 million of reinsurance coverage on a portion of current and expected new insurance written for the 2023 book year, effective January 1, 2023.

Current wording

On January 30, 2024, we executed an excess-of-loss reinsurance transaction with a panel of reinsurers, which, following an amendment in December 2024, provides up to $270 million of reinsurance coverage on a portion of current and expected new insurance written for the 2024 book year, effective January 1, 2024.

Previous wording

Subsequent to year end, on January 30, 2024, we executed an excess-of-loss reinsurance transaction with a panel of reinsurers, which provides up to $255 million of reinsurance coverage on a portion of current and expected new insurance written for the 2024 book year, effective January 1, 2024.

Current wording

On June 25, 2024, we executed an excess-of-loss reinsurance transaction with a panel of reinsurers, which provides approximately $90 million of reinsurance coverage on a portion of existing mortgage insurance written from July 1, 2023, through December 31, 2023, effective June 1, 2024.

Previous wording

Capital returns. On April 26, 2022, our Board of Directors approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend, subject to approval by our Board of Directors each quarter. We paid quarterly dividends of $0.14 per share in March of 2023 and May, September and December of 2022. On May 1, 2023, we announced an increase of our quarterly dividend to $0.16 per share which was paid in June, September and December 2023. In February of 2024, we announced our first quarter dividend of $0.16 per share. Future dividend payments are subject to quarterly review and approval by our Board of Directors and Genworth and will be targeted to be paid in the third month of each subsequent quarter. In April and November 2023, our primary mortgage insurance operating company, EMICO, completed distributions to EHI that supported our ability to pay dividends in 2023. We intend to use these proceeds and future EMICO distributions to fund the quarterly dividend as well as to bolster our financial flexibility and potentially return additional capital to shareholders.

Current wording

Capital returns. On April 26, 2022, our Board of Directors approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend, subject to approval by our Board of Directors each quarter. We paid quarterly dividends of $0.14 per share in March of 2023 and May, September and December of 2022. We paid quarterly dividends of $0.16 per share in June, September and December 2023 and March 2024. On May 1, 2024, we also announced an increase to our quarterly dividend to $0.185 per share which was paid in June, September and December 2024. In November 2024 EMICO completed a distribution to EHI that supports our ability to pay a quarterly dividend. Future dividend payments are subject to quarterly review and approval by our Board of Directors and Genworth and will be targeted to be paid in the third month of each quarter.

Previous wording

On August 1, 2023, we announced the authorization of a new share repurchase program which allows for the repurchase of up to an additional $100 million of EHI’s common stock. Under the program, share repurchases may be made at our discretion from time to time in open market transactions, privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans. In conjunction with this authorization, we have entered into an agreement with Genworth Holdings, Inc. to repurchase its EHI shares on a pro rata basis as part of the program. The share repurchase program is not expected to change Genworth’s ownership interest in Enact post-completion. We expect the timing and amount of any future share repurchases will be opportunistic and will depend on a variety of factors, including EHI’s share price, capital availability, business and market conditions, regulatory requirements, and debt covenant restrictions. The program does not obligate EHI to acquire any amount of common stock, it may be suspended or terminated at any time at the Company’s discretion without prior notice, and it does not have a specified expiration date.

Current wording

On May 1, 2024, we announced the authorization of a share repurchase program that allows for the repurchase of up to $250 million of EHI’s common stock. Under this program, share repurchases may be made at our discretion from time to time in open market transactions, privately negotiated transactions, or by other means, including through Rule 10b5-1 and Rule 10b-18 trading plans. In conjunction with this authorization, we have entered into an agreement with Genworth Holdings, Inc. to repurchase its EHI shares on a pro rata basis as part of the program. The share repurchase program is not expected to change Genworth’s ownership interest in Enact post-completion. We expect the timing and amount of any future share repurchases will be opportunistic and will depend on a variety of factors, including EHI’s share price, capital availability, business and market conditions, regulatory requirements, and debt covenant restrictions. The program does not obligate EHI to acquire any amount of common stock, it may be suspended or terminated at any time at the Company’s discretion without prior notice, and it does not have a specified expiration date.

Previous wording

(3)Net earned premium rate is calculated by dividing earned premium by average primary IIF.

Current wording

(3)Net earned premium rate is calculated by dividing direct earned premium less ceded premium, by average primary IIF.

Previous wording

Net investment income increased primarily due to higher investment yields due to interest rate increases during 2023 coupled with higher average invested assets.

Current wording

Net investment income increased primarily due to higher investment yields due to elevated interest rates coupled with higher average invested assets.

Previous wording

Losses incurred in 2023 and 2022 were impacted byfavorable reserve adjustments. During 2023, we released reserves of $241 million primarily due to better than expected cure experience on delinquencies from 2022 and earlier, including a portion of those related to the emergence of COVID-19. A component of the reserve release also related to delinquencies from 2022, as uncertainty in the economic environment has not negatively impacted cure performance to the extent initially expected. During 2022, we recorded $314 million of reserve releases. Due to uncertainty in the economic environment, we increased the expected claim rate on new delinquencies in 2022 which contributed to reserve strengthening of $46 million on previous quarter delinquencies in 2022.

Current wording

Losses incurred in 2024 and 2023 were impacted byfavorable reserve adjustments. During 2024, we released reserves of $252 million primarily on prior accident year reserves as a result of strong cure performance and loss mitigation efforts. During 2023, we recorded $241 million of reserve releases.

Previous wording

New primary delinquencies were 41,617 in 2023 compared to 35,996 in 2022, resulting in $265 million and $171 million of losses, respectively.

Current wording

New primary delinquencies were 48,537 in 2024 compared to 41,617 in 2023, resulting in $287 million and $265 million of losses, respectively.