Enact: a spotless quarter, a new policy risk called a pilot

Clean credit, a raised $600 million capital-return target and a 9x multiple collide with an FHFA pilot that could shorten the life of a $275 billion book

ACT · Earnings Call · 2026-11-05

A clean quarter, priced for perfection

Enact's third quarter was, on its face, exactly what a mortgage insurer wants to report. Adjusted operating income was $164 million, or $1.19 per diluted share, with a 12.4% adjusted operating ROE; new insurance written came in at $14 billion and insurance in force reached $275 billion, up 1% year over year. Persistency held at 81%, PMIERs sufficiency was 158%, and management raised 2026 capital return guidance to roughly $600 million. The stock arrives at this report with high expectations: shares are up 5.2% over the last 90 days, just 4.6% below their September peak, and the full post-IPO move is +133%. At 9.2x trailing net income, the shares are no longer cheap on a relative basis; they are a show-me story about durability. The operating backdrop explains both the strength and the anxiety. Mortgage rates moved higher during the quarter, putting pressure on housing activity; the impact of high rates showed up in a 7% sequential decline in new insurance written. Yet 89% of the insured portfolio carries mortgage rates below 7%, so persistency stays elevated and the back book keeps generating premium. That is the central tension: a high-rate environment protects the existing book from refinance lapse while throttling new production. Enact is earning money on a portfolio that is staying put longer than normal.

The new risk is called a pilot

The genuinely new item this quarter was not credit or capital. It was Washington. Rohit Gupta spent part of his prepared remarks on the recent presidential executive order on decreasing housing costs, and analysts spent most of the Q&A on it. The order directs the FHFA to establish a pilot focused on mortgage originations going forward, with the implication that borrowers could cancel mortgage insurance more easily, perhaps through automated valuation models rather than appraisals.

when you think about the executive order, it's essentially direct FHFA to set up a pilot focused on mortgage originations going forward after the establishment of the pilot. So as of right now, that's what we are focused on from a consumer behavior perspective, that is tough to predict.
Rohit Gupta, President and Chief Executive Officer · 2026-11-05

This is a fresh company keyword: pilot. Enact has discussed Washington before — on the February call management said “we remain actively engaged with the new administration, and that includes treasury, FHFA, the GSEs as well as policymakers” — Rohit Gupta, President and Chief Executive Officer · 2026-02-04 — but that was a broad list of ideas. This is a specific mechanism with a specific channel: mortgage insurance cancellation. Management repeatedly declined to quantify it: “we have not received guidance from GSEs or FHFA on what the scope of the pilot would be, what the parameters would be” — Rohit Gupta, President and Chief Executive Officer · 2026-11-05. The mitigating detail is that the pilot appears prospective, not retroactive. That matters enormously for a book with meaningful embedded equity. The 2020-21 vintages were enormous — roughly $200 billion of original new insurance written — but only about 30% remains, and the company has been rolling off those books for some time. If the pilot applies only to loans originated after it is established, the existing $275 billion insurance-in-force book is largely insulated. Management also pointed out that borrower-initiated cancellations already run about $1.5 billion per quarter, or roughly 5,000 policies, representing about 2% annualized lapse. The pilot may lower friction on behavior that already exists rather than create a new wave. But the market will not know until the parameters are published.

Credit: still the engine, but the reserve-release tailwind is fading

Credit remains the best part of the story. New delinquencies rose to 14,400 from 12,300 sequentially, cures were 50%, total delinquencies increased to 26,100 and the delinquency rate rose 20 basis points to 2.8%. The cure rate remains elevated, and the claim rate on new delinquencies was held at 8%. That produced a $37 million reserve release and a 20% loss ratio. Management described recent vintages as performing in line with or better than pricing expectations, which is the key underwriting claim. But the forward math is less exciting. The reserve release was $45 million a year ago and $37 million in the second quarter; the tailwind is not growing. Rohit Gupta was explicit about why: “when we have made a change in our assumptions on roll rate, that does reduce the opportunity set” — Rohit Gupta, President and Chief Executive Officer · 2026-11-05. In other words, the company has already lowered its roll rate assumption, so future losses on new delinquencies should be lower — but so is the room for favorable reserve development. Dean Mitchell also repeated the earlier warning that delinquency rates could grind higher into 2027 as purchase-heavy 2022-24 books season, though he framed it as normal loss development rather than credit deterioration. That is consistent with what management told investors earlier this year. On the May call, Dean said “I think it's reasonable to expect the delinquency rate could tick up from the Q1 levels” — Hardin Mitchell, Chief Financial Officer and Treasurer · 2026-05-06. It did. The difference now is that the market is paying a higher multiple for the earnings stream just as the reserve-release component is fading.

Capital return and the reinsurance bid

The capital story is strong and management knows it. Enact bought back 2.4 million shares at an average price of $48.19 for $118 million and paid $33 million in dividends in the quarter; the full-year capital return target is now about $600 million. Dean Mitchell defended the buyback even with the stock near its highs: “we still believe share repurchases are a compelling use of capital at current valuations” — Hardin Mitchell, Chief Financial Officer and Treasurer · 2026-11-05. That is a meaningful statement at roughly 1.26x book value, the level Bose George cited on the call. It says management sees intrinsic value above the current price, but it also says the company does not have enough organic deployment opportunities in a smaller origination market. The reinsurance market is providing another outlet for capital efficiency. Enact entered a new forward quota share agreement covering about 35% of expected 2028 new insurance written, and Dean described the demand side bluntly: “I would describe the demand for mortgage credit default risk across the reinsurance market as very strong” — Hardin Mitchell, Chief Financial Officer and Treasurer · 2026-11-05. That has allowed the company to secure coverage on attractive terms in the reinsurance market, with pricing at the low end of its low-to-mid-single-digit cost-of-capital range. The A.M. Best upgrade to A and BBB supports the same narrative. The pattern of raising capital return through the year is familiar. On the prior-year call, Dean noted “the increase from $400 million to $500 and even if you go back a quarter, the increase from $350 million to $500 million” — Hardin Mitchell, Chief Financial Officer and Treasurer · 2025-11-06. Enact tends to start conservative and ratchet up as business performance confirms itself. This quarter's move to $600 million is the same playbook, but it lands at a higher valuation and with a new policy overhang.

What to watch

The next data point is not a quarterly earnings line; it is the scope of the FHFA pilot. If it remains prospective and narrowly focused on new originations, Enact's existing book and 81% persistency are largely protected. If it broadens to automatic cancellation on seasoned loans, the market will quickly re-underwrite the duration of the $275 billion insurance-in-force book. Management's confidence is understandable — the current book is well reserved, deeply embedded in borrower equity, and supported by strong reinsurance demand — but the stock is near its high and the new pilot keyword is the kind of policy variable that does not show up in a loss ratio until it does. Enact remains a high-quality operator; the burden of proof has shifted from credit to Washington.