Enact Mortgage Insurance Enters into Two Quota Share Reinsurance Agreements

Rhea-AI Summary

Enact Holdings (Nasdaq: ACT) announced that its subsidiary, Enact Mortgage Insurance , has secured two new quota share reinsurance agreements. Under these arrangements, the company will cede approximately 27% of portions of expected new insurance written for two periods: January 1-December 31, 2025, and January 1-December 31, 2026. The agreements were made with a panel of highly-rated reinsurers, demonstrating the company's commitment to risk management and capital optimization while supporting customer service in the mortgage insurance sector.

Positive

• Secured significant reinsurance coverage (27%) for new insurance written
• Risk management improvement through partnership with highly-rated reinsurers
• Enhanced capital optimization strategy

Negative

• Reduction in potential earnings by ceding 27% of new insurance written

Insights

Financial Analyst

The new quota share reinsurance agreements represent a significant strategic move for Enact Mortgage Insurance. By ceding 27% of expected new insurance written for 2025 and 2026, the company is effectively implementing a robust risk management strategy while maintaining capital efficiency. This arrangement helps protect against potential mortgage defaults and spreads risk across multiple highly-rated reinsurers.

The timing is particularly strategic given the current housing market dynamics and interest rate environment. This risk-sharing structure should enhance Enact's underwriting capacity and financial flexibility, potentially leading to improved risk-adjusted returns. The multi-year commitment also provides predictability in their risk management framework and could positively impact their capital requirements under regulatory frameworks.

Insurance Industry Expert

These agreements demonstrate sophisticated portfolio management in the mortgage insurance sector. The 27% quota share structure is well-aligned with industry standards and provides meaningful risk transfer while allowing Enact to retain significant exposure to their core business. The participation of multiple highly-rated reinsurers indicates strong market confidence in Enact's underwriting practices and business model.

The forward-looking nature of these agreements, covering 2025 and 2026 new insurance written, provides valuable certainty in capacity and pricing. This proactive approach to risk management could give Enact a competitive advantage in pricing and capacity deployment, potentially supporting market share growth while maintaining prudent risk levels.

Secures 27% of forward quota share reinsurance coverage from a panel of third-party reinsurance providers

RALEIGH, N.C., Dec. 03, 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 entered into two quota share reinsurance agreements with a broad panel of highly-rated reinsurers.

Under the agreements, and subject to certain conditions, Enact will cede approximately 27% of a portion of expected new insurance written for the period from January 1, 2025 through December 31, 2025 and will cede approximately 27% of a portion of expected new insurance written for the period from January 1, 2026 through December 31, 2026.

“We are pleased to have entered into these two new quota share reinsurance agreements, which represent a continuation of our commitment to prudent risk management and capital optimization while also supporting our ability to serve our customers,” said Rohit Gupta, President and CEO of Enact. “We appreciate the support and partnership from our broad panel of highly-rated reinsurers as we continue our mission to help people responsibly achieve the dream of homeownership.”

Safe Harbor Statement
This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, our expected financial and operational results, the related assumptions underlying our expected results, guidance concerning the future return of capital 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 a 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.

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.

This press release was published by a CLEAR® Verified individual.

FAQ

What percentage of new insurance will Enact Holdings (ACT) cede in its 2025-2026 reinsurance agreements?

Enact Holdings will cede approximately 27% of portions of expected new insurance written for both 2025 and 2026 periods.

When do Enact Holdings' (ACT) new quota share reinsurance agreements take effect?

The agreements cover two periods: January 1 through December 31, 2025, and January 1 through December 31, 2026.

What is the purpose of Enact Holdings' (ACT) new reinsurance agreements?

The agreements are designed to support risk management and capital optimization while maintaining the company's ability to serve customers in the mortgage insurance sector.