Enact Completes XOL Reinsurance Transaction as Part of its Diversified Credit Risk Transfer Program
Enact Holdings (Nasdaq: ACT), a renowned provider of private mortgage insurance, announced the completion of a $90 million excess of loss reinsurance transaction. Effective June 1, 2024, this coverage applies to specific mortgage insurance policies issued between July 1, 2023, and December 31, 2023. The reinsurance is sourced from a panel of reinsurers rated “A-” or higher by S&P and A.M. Best, and “A3” or higher by Moody’s. Enact's President and CEO, Rohit Gupta, emphasized that this transaction is a key part of their credit risk transfer (CRT) strategy to minimize credit risk and improve capital efficiency.
- Secured $90 million of excess of loss reinsurance coverage.
- Reinsurance sourced from highly rated panel of reinsurers (A- or higher by S&P, A.M. Best; A3 or higher by Moody's).
- Effective date of June 1, 2024, enhances capital efficiency and mitigates credit risk.
- None.
Insights
Enact Holdings has secured
This transaction covers mortgage insurance policies written during the latter half of 2023 and is effective from June 2024. The backing by A-rated reinsurers ensures the credibility and financial stability of this arrangement, mitigating counterparty risk. These high credit ratings (A- or better by S&P, A3 or better by Moody's) are crucial, as they reflect the reinsurers' ability to meet their financial commitments, assuring stakeholders that Enact’s risk transfer is backed by stable entities.
From a financial perspective, this deal enhances Enact’s ability to manage its capital more efficiently, potentially freeing up resources that can be used for growth initiatives or returned to shareholders. It also reduces the volatility of earnings by stabilizing potential losses. This strategic move aligns with industry norms where insurers leverage CRT to improve capital ratios and lessen the impact of adverse claims events.
Investors should consider this development as a positive indicator of Enact's commitment to optimizing its financial structure and minimizing risks. Such steps likely translate into a more resilient and financially robust company in the long-term, which can be beneficial for share valuation.
The reinsurance market plays a vital role in the insurance ecosystem, particularly through Credit Risk Transfer (CRT) strategies like the one executed by Enact Holdings. For retail investors, it's key to understand that CRT transactions allow insurance companies to transfer parts of their credit risk exposure to reinsurers. By securing $90 million in excess of loss reinsurance coverage, Enact is effectively safeguarding its balance sheet against unexpected spikes in claims costs.
This strategic move also resonates well within the market, showcasing Enact's robust risk management framework. By spreading out the risk among multiple highly rated reinsurers, Enact is not putting all its eggs in one basket, which is a prudent approach in the reinsurance domain.
Additionally, this transaction could signal Enact's confidence in the underlying quality of their insured portfolio. Ensuring robust backing from A-rated reinsurers instills confidence in the market regarding Enact's stability and foresight in managing potential downturns.
In the short term, this deal can enhance Enact's market perception, potentially leading to a more favorable stock price performance as investors recognize the company's proactive risk management measures. In the long term, it supports sustained growth and stability, making Enact a more attractive investment proposition.
Secures approximately
RALEIGH, N.C., June 27, 2024 (GLOBE NEWSWIRE) -- Enact Holdings, Inc. (Nasdaq: ACT) (Enact), a leading provider of private mortgage insurance through its insurance subsidiaries, today announced that its flagship legal entity, Enact Mortgage Insurance Corporation, has secured approximately
“This transaction marks another step in the successful execution of our CRT strategy,” said Rohit Gupta, President and CEO of Enact. "We remain committed to our efforts to minimize credit risk and enhance our capital efficiency while continuing to deliver value for all our stakeholders.”
About Enact Holdings, Inc.
Enact (Nasdaq: ACT), operating principally through its wholly-owned subsidiary Enact Mortgage Insurance Corporation since 1981, is a leading U.S. private mortgage insurance provider committed to helping more people achieve the dream of homeownership. Building on a deep understanding of lenders' businesses and a legacy of financial strength, we partner with lenders to bring best-in class service, leading underwriting expertise, and extensive risk and capital management to the mortgage process, helping to put more people in homes and keep them there. By empowering customers and their borrowers, Enact seeks to positively impact the lives of those in the communities in which it serves in a sustainable way. Enact is headquartered in Raleigh, North Carolina.
Safe Harbor Statement
This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements may address, among other things, our expected financial and operational results, the related assumptions underlying our expected results, and the quotations of management. These forward-looking statements are distinguished by use of words such as “will,” “may,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” “predict,” “project,” “target,” “could,” “should,” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. Our forward-looking statements contained herein speak only as of the date of this press release. Factors or events that we cannot predict, including risks related to an economic downturn or recession in the United States and in other countries around the world; changes in political, business, regulatory, and economic conditions; changes in or to Fannie Mae and Freddie Mac (the “GSEs”), whether through Federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; an increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; and other factors described in the risk factors contained in our 2023 Annual Report on Form 10-K and other filings with the SEC, may cause our actual results to differ from those expressed in forward-looking statements. Although Enact believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Enact can give no assurance that its expectations will be achieved and it undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise, except as required by applicable law.
FAQ
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