ACT · Enact Holdings, Inc.

Enact Holdings, Inc. reported a solid first quarter of fiscal 2026, characterized by strong bottom-line growth despite a challenging operating environment for top-line expansion. The company successfully navigated mortgage rate volatility, leveraging refinance activity to drive revenue while managing expenses to enhance profitability.

Revenue for Q1 FY2026 was $312.1 million, an increase of 1.7% compared to $306.8 million in the prior year period. This modest growth was largely driven by refinance volume in the first quarter. However, the benefit from increased refinance activity was partially offset by a decrease in the persistency rate. Management noted that persistency decreased largely due to lapse, driven specifically by mortgage rate volatility and increased refinance activity. This dynamic highlights the trade-offs inherent in the current rate environment: while refinance activity boosts new business volume, it simultaneously accelerates the cancellation of existing policies.

Profitability outpaced revenue growth, with Diluted EPS rising 9.3% to $1.18, up from $1.08 in Q1 FY2025. This improvement reflects effective cost management and operational efficiency. Acquisition and operating expenses, net of deferrals, decreased for the three months ended March 31, 2026. Management attributed this decline primarily to higher ceding commissions and lower professional services expenses. The reduction in operating expenses provided a significant tailwind to earnings, more than compensating for the modest revenue growth.

Cash generation remained a cornerstone of the company's financial profile. Net cash provided by operating activities was $224.0 million for the quarter, nearly matching the $226.7 million generated in the same period last year. This consistent cash flow underscores the inherent strength of the mortgage insurance business model and supports the company's capital allocation strategy. Management emphasized that returning capital to shareholders, balanced with growth and risk management priorities, remains a priority. In March 2026, the company's primary mortgage insurance operating company, EMICO, paid a dividend to EHI, reinforcing the firm's liquidity position and ability to return capital.

Looking ahead, management indicated that the timing and amount of future share repurchases will be opportunistic, dependent on factors including share price, capital availability, and market conditions. The principal sources of liquidity—insurance premiums, net investment income, and cash flows from investment sales and maturities—remain robust, positioning the company to continue executing its strategy of driving shareholder value through disciplined capital allocation.