Mortgage insurance provider Enact Holdings (NASDAQ:ACT) missed Wall Street’s revenue expectations in Q2 CY2025 as sales rose 2% year on year to $304.9 million. Its non-GAAP profit of $1.15 per share was 3.8% above analysts’ consensus estimates.
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Enact Holdings (ACT) Q2 CY2025 Highlights:
- Revenue: $304.9 million vs analyst estimates of $308.3 million (2% year-on-year growth, 1.1% miss)
- Adjusted EPS: $1.15 vs analyst estimates of $1.11 (3.8% beat)
- Adjusted Operating Income: $221.8 million (72.8% margin, 8.5% year-on-year decline)
- Market Capitalization: $5.56 billion
StockStory’s Take
Enact Holdings' second quarter results were shaped by a mix of disciplined underwriting and continued credit strength, despite revenue landing just below Wall Street's expectations. Management highlighted robust new insurance written and resilient borrower credit metrics, noting that embedded equity and effective loss mitigation contributed to a significant reserve release. CEO Rohit Gupta pointed to the company’s ability to “navigate a complex macroeconomic environment,” emphasizing that favorable delinquency trends and strong persistency helped offset ongoing industry headwinds, including affordability challenges and regional home price softness.
Looking forward, management’s outlook centers on maintaining strong credit performance and capital flexibility in the face of macroeconomic uncertainty and potential regulatory changes. CEO Rohit Gupta underlined the importance of demographic tailwinds and prudent risk management, stating, “Our strong balance sheet, disciplined risk management and thoughtful approach to capital deployment provide meaningful flexibility as we execute our strategy.” The company’s focus remains on adapting to any shifts in housing policy, leveraging a robust capital position, and executing on new business initiatives to drive long-term growth.
Key Insights from Management’s Remarks
Management attributed quarterly performance to constructive pricing, expense discipline, and robust credit trends, while acknowledging the impact of ongoing macroeconomic and regulatory uncertainty.
- Credit performance remained strong: Management credited the continued low level of new delinquencies and elevated cure rates to a resilient labor market and borrowers’ prioritization of mortgage payments. CFO Dean Mitchell noted that embedded home price appreciation (HPA) across the portfolio played a significant role in limiting loss development, with a 52% cure rate supporting a $48 million reserve release.
- New insurance written offset market headwinds: Despite overall softness in industry origination volumes, Enact wrote $13 billion in new insurance—helped by seasonal factors—while insurance in force grew 1% year-over-year. CEO Rohit Gupta highlighted that, “our business is supported by strong demographic trends, especially within the historical first-time homebuyer segment.”
- Constructive pricing environment: The company’s proprietary Rate 360 pricing engine allowed for risk-adjusted pricing and consistent underwriting standards, which management believes helped maintain competitive positioning even as some regional markets saw increased inventory and price softness.
- Expense management amid inflation: Operating expenses were flat year-over-year, as management balanced ongoing investments in technology and customer experience with prudent cost controls. This discipline helped preserve margins despite modest revenue growth and inflationary pressures.
- Capital return plans increased: Enact raised its capital return target for the year to approximately $400 million, reflecting confidence in its capital position and credit outlook. Management stated that the scale and form of capital return will remain flexible in response to future business performance and market conditions.
Drivers of Future Performance
Enact’s guidance is grounded in expectations for sustained credit quality, cautious capital deployment, and adaptability to evolving housing and regulatory trends.
- Stable credit environment: Management anticipates that continued strength in borrower credit—supported by a resilient labor market and high embedded equity—will help mitigate potential losses even if regional home prices soften further. CFO Dean Mitchell underscored that the 9% claim rate assumption remains conservative given ongoing macro uncertainty.
- Macro and policy headwinds: The company is closely monitoring the impact of persistent high mortgage rates and the possibility of new tariffs, which could influence both origination volumes and consumer affordability. Gupta noted that uncertainty around trade policy and its potential effect on market sentiment are key factors in the company’s outlook.
- Regulatory engagement and business diversification: Management is focused on maintaining active dialogue with government-sponsored enterprises (GSEs) and policymakers to adapt to any regulatory changes. Meanwhile, the continued expansion of Enact Re in credit risk transfer (CRT) transactions is expected to diversify earnings and support long-term growth.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) trends in new insurance written and persistency as the housing market adapts to affordability pressures, (2) any shifts in delinquency rates or claims as regional home prices fluctuate, and (3) the impact of regulatory changes or new GSE guidelines on Enact’s capital allocation strategy. Expansion of the Enact Re platform and execution on capital returns will also be key areas of focus.
Enact Holdings currently trades at $37.72, up from $34.39 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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