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Enact Holdings, Inc. - Quarter Report: 2023 March (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from    to
Commission File Number 001-40399
Enact Logo.jpg
Enact Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-1579166
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
8325 Six Forks Road
Raleigh, North Carolina 27615
(919) 846-4100
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareACTThe Nasdaq Stock Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): YesNo
As of May 1, 2023, there were 161,580,827 shares of Common Stock, par value $0.01 per share, outstanding.



TABLE OF CONTENTS
Page
1


Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” 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 quarterly report.
Although Enact Holdings, Inc. (the “Company”) believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company 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. Factors or events that we cannot predict, including the following, may cause our actual results to differ from those expressed in forward-looking statements:
inability to continue to maintain the private mortgage insurer eligibility requirements (“PMIERs”) or any other restrictions imposed on us by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), government-sponsored enterprises collectively referred to as the “GSEs”
deterioration in economic conditions or a decline in home prices, including a severe recession or impacts from banking sector volatility;
uncertainty around COVID-19 and the remaining effects of forbearance programs and foreclosure timing;
uncertainty of our loss reserve estimates or inaccuracies in our models;
competition for our customers or the loss of a significant customer;
changes to the charters or practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance;
lenders or investors seeking alternatives to private mortgage insurance;
failure of our risk management or loss mitigation strategies;
fluctuations and continued increases in interest rates;
limited availability of capital or reinsurance;
adverse actions by rating agencies;
competition with government-owned enterprises and GSEs;
failure to manage the risk in our investment portfolio;
disruption in the servicing of mortgages covered by our insurance policies or poor servicer performance;
unanticipated claims arising under and risks associated with our delegated underwriting program or contract underwriting program;
2


inadequacy of the premiums we charge to compensate for the losses we incur;
decrease in the volume of Low-Down Payment Loan originations;
failure to protect our confidential customer information;
adverse changes in regulatory requirements;
inability to maintain sufficient regulatory capital;
risks relating to our continuing relationship with our parent;
changes in tax laws;
litigation, regulatory investigations or other actions;
changes in accounting principles or policies or in our application of such accounting principles or policies;
inability to attract and retain key employees;
failure or any compromise of the security of our computer systems, disaster recovery systems, business continuity plans and failures to safeguard or breaches of confidential information; and
occurrence of natural or man-made disasters or public health emergencies, including pandemics and disasters caused or exacerbated by climate change.
We provide additional information regarding these and other risks and uncertainties in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2023. In addition, unlisted factors may present significant additional obstacles to the realization of forward-looking statements. We therefore caution you against relying on any forward-looking statements.
3


Part I. Financial Information
Item 1. Financial Statements
ENACT HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
2023
December 31,
2022
(Amounts in thousands, except par value amount)(Unaudited) 
Assets  
Fixed maturity securities available-for-sale, at fair value (amortized cost of $5,337,054 and $5,371,673 as of March 31, 2023, and December 31, 2022, respectively)
$4,929,627 $4,884,760 
Short-term investments, at fair value2,185 3,047 
Total investments4,931,812 4,887,807 
Cash and cash equivalents621,621 513,775 
Accrued investment income35,945 35,844 
Deferred acquisition costs25,954 26,121 
Premiums receivable (net of allowance for credit losses of $868 and $873 as of March 31, 2023, and December 31, 2022, respectively)
42,005 41,738 
Other assets77,026 76,391 
Deferred tax asset107,868 127,473 
Total assets$5,842,231 $5,709,149 
Liabilities and equity
Liabilities:
Loss reserves$501,427 $519,008 
Unearned premiums188,680 202,717 
Other liabilities112,043 143,686 
Long-term borrowings743,460 742,830 
Total liabilities1,545,610 1,608,241 
Equity:
Common stock ($0.01 par value; 600,000 shares authorized; 161,938 shares issued and outstanding as of March 31, 2023, and 162,779 shares issued and outstanding as of December 31, 2022)
1,619 1,628 
Additional paid-in capital2,362,281 2,382,068 
Accumulated other comprehensive income(320,242)(382,744)
Retained earnings2,252,963 2,099,956 
Total equity4,296,621 4,100,908 
Total liabilities and equity$5,842,231 $5,709,149 
See Notes to Condensed Consolidated Financial Statements
4


ENACT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 Three months ended
March 31,
(Amounts in thousands, except per share amounts)20232022
Revenues:
Premiums$235,108 $234,279 
Net investment income45,341 35,146 
Net investment gains (losses)(122)(339)
Other income612 502 
Total revenues280,939 269,588 
Losses and expenses:
Losses incurred(10,984)(10,446)
Acquisition and operating expenses, net of deferrals51,705 54,262 
Amortization of deferred acquisition costs and intangibles2,640 3,090 
Interest expense13,065 12,776 
Total losses and expenses56,426 59,682 
Income before income taxes
224,513 209,906 
Provision for income taxes48,525 45,276 
Net income$175,988 $164,630 
Net income per common share:
Basic$1.08 $1.01 
Diluted$1.08 $1.01 
Weighted average common shares outstanding:
Basic162,442 162,841 
Diluted163,179 163,054 
See Notes to Condensed Consolidated Financial Statements
5


ENACT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 Three months ended
March 31,
(Amounts in thousands)20232022
Net income$175,988 $164,630 
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on securities without an allowance for credit losses
62,510 (224,300)
Foreign currency translation(8)29 
Other comprehensive income (loss)62,502 (224,271)
Total comprehensive income (loss)$238,490 $(59,641)
See Notes to Condensed Consolidated Financial Statements
6


ENACT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Three months ended March 31, 2023
(Amounts in thousands)
Common
stock
Additional
paid-in
capital
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
equity
Balance as of December 31, 2022$1,628 $2,382,068 $(382,744)$2,099,956 $4,100,908 
Comprehensive income (loss):
Net income— — — 175,988 175,988 
Other comprehensive loss, net of taxes— — 62,502 — 62,502 
Repurchase of common stock(10)(22,190)— — (22,200)
Stock-based compensation expense and exercises and other2,403 — (225)2,179 
Dividends— — — (22,756)(22,756)
Balance as of March 31, 2023$1,619 $2,362,281 $(320,242)$2,252,963 $4,296,621 
Three months ended March 31, 2022
(Amounts in thousands)
Common
stock
Additional
paid-in
capital
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
equity
Balance as of December 31, 2021$1,628 $2,371,861 $83,581 $1,648,453 $4,105,523 
Comprehensive income (loss):
Net income— — — 164,630 164,630 
Other comprehensive income, net of taxes— — (224,271)— (224,271)
Stock-based compensation expense and exercises and other— 2,707 — — 2,707 
Balance as of March 31, 2022$1,628 $2,374,568 $(140,690)$1,813,083 $4,048,589 

See Notes to Condensed Consolidated Financial Statements
7


ENACT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three months ended
March 31,
(Amounts in thousands)20232022
Cash flows from operating activities:  
Net income$175,988 $164,630 
Adjustments to reconcile net income to net cash provided by operating activities:
Net investment losses122 339 
Amortization of fixed maturity securities discounts and premiums(657)(961)
Amortization of deferred acquisition costs and intangibles2,640 3,090 
Acquisition costs deferred(1,546)(1,629)
Deferred income taxes2,626 2,943 
Stock-based compensation expense2,179 2,715 
Amortization of debt issuance costs630 588 
Other— (8)
Change in certain assets and liabilities:
Accrued investment income(101)(1,504)
Premiums receivable(267)1,885 
Other assets986 2,874 
Loss reserves(17,581)(16,046)
Unearned premiums(14,037)(9,909)
Other liabilities(31,643)11,822 
Net cash provided by operating activities119,339 160,829 
Cash flows from investing activities:
Purchases of fixed maturity securities available-for-sale (121,118)(351,130)
Proceeds from sales of fixed maturity securities available-for-sale19,544 90,422 
Proceeds from maturities of fixed maturity securities available-for-sale136,776 114,211 
Net change in short-term investments863 — 
Other(2,602)— 
Net cash provided by (used in) investing activities33,463 (146,497)
Cash flows from financing activities:
Repurchase of common stock(22,200)— 
Dividends paid(22,756)— 
Net cash used in financing activities(44,956) 
Net increase in cash and cash equivalents107,846 14,332 
Cash and cash equivalents at beginning of period513,775 425,828 
Cash and cash equivalents at end of period$621,621 $440,160 
See Notes to Condensed Consolidated Financial Statements
8

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)Nature of business, organization structure and basis of presentation
The accompanying unaudited condensed consolidated financial statements include, on a consolidated basis, the accounts of Enact Holdings, Inc. (“EHI,” together with its subsidiaries, the “Company,” “we,” “us” or “our”) (formerly known as Genworth Mortgage Holdings, Inc.). EHI is a subsidiary of Genworth Financial, Inc. (“Genworth” or “Parent”) and has been since EHI’s incorporation in Delaware in 2012. In September 2021, we completed a minority initial public offering (“IPO”) for 18.4% of EHI’s common stock.
We are engaged in the business of writing and assuming residential mortgage guaranty insurance. The insurance protects lenders and investors against certain losses resulting from nonpayment of loans secured by mortgages, deeds of trust, or other instruments constituting a lien on residential real estate. We offer private mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans (“primary mortgage insurance”). Our primary mortgage insurance enables borrowers to buy homes with a down payment of less than 20% of the home’s value. Primary mortgage insurance also facilitates the sale of these low down payment mortgage loans in the secondary mortgage market, most of which are sold to government sponsored enterprises. We also selectively enter into insurance transactions with lenders and investors, under which we insure a portfolio of loans at or after origination.
We also perform fee-based contract underwriting services for mortgage lenders. The provision of underwriting services by mortgage insurers eliminates the duplicative lender and mortgage insurer underwriting activities and expedites the approval process.
We operate our business through our primary insurance subsidiary, Enact Mortgage Insurance Corporation, (“EMICO”), formerly known as Genworth Mortgage Insurance Corporation, with operations in all 50 states and the District of Columbia. We completed name changes to some of our subsidiary legal entities during the first quarter of 2022. EMICO is an approved insurer by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Fannie Mae and Freddie Mac are government-sponsored enterprises and we refer to them collectively as the “GSEs.”
We operate our business in a single segment, which is how our chief operating decision maker (who is our Chief Executive Officer) reviews our financial performance and allocates resources. Our segment includes a run-off insurance block with reference properties in Mexico (“run-off business”), which is immaterial to our condensed consolidated financial statements.
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes for the years ended December 31, 2022 and 2021.

9

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(2)Accounting changes
Accounting Pronouncements Recently Adopted
We have not adopted new accounting pronouncements in 2023.
Accounting Pronouncements Not Yet Adopted
There are no significant new accounting pronouncements impacting our financial statements.
(3)Investments
Net Investment Income
Sources of net investment income were as follows for the periods indicated:
Three months ended
March 31,
(Amounts in thousands)
20232022
Fixed maturity securities available-for-sale$41,375 $36,534 
Cash, cash equivalents and short-term investments5,620 10 
Gross investment income before expenses and fees46,995 36,544 
Investment expenses and fees(1,654)(1,398)
Net investment income$45,341 $35,146 
Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
Three months ended
March 31,
(Amounts in thousands)
20232022
Fixed maturity securities available-for-sale:
Gross realized gains$— $350 
Gross realized (losses)(122)(862)
Net realized gains (losses)(122)(512)
Net change in allowance for credit losses on fixed maturity securities available-for-sale— 173 
Net investment gains (losses)$(122)$(339)
There was no allowance for credit losses recorded on fixed maturity securities classified as available-for-sale as of March 31, 2023 or December 31, 2022 or activity during the three months ended March 31, 2023.
10

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unrealized Investment Gains (Losses)
Net unrealized gains and losses on available-for-sale securities reflected as a separate component of accumulated other comprehensive income (“AOCI”) were as follows as of the dates indicated:
(Amounts in thousands)
March 31, 2023December 31, 2022
Net unrealized gains (losses) on investment securities:
Fixed maturity securities$(407,427)$(486,913)
Short-term investments(29)(30)
Unrealized gains (losses) on investment securities(407,456)(486,943)
Income taxes87,070 104,047 
Net unrealized investment gains (losses)$(320,386)$(382,896)
The change in net unrealized gains (losses) on available-for-sale securities reported in accumulated other comprehensive income was as follows as of and for the periods indicated:
Three months ended
March 31,
(Amounts in thousands)
20232022
Beginning balance$(382,896)$83,588 
Unrealized gains (losses) arising during the period:
Unrealized gains (losses) on investment securities79,366 (285,401)
Provision for income taxes(16,952)60,697 
Change in unrealized gains (losses) on investment securities62,414 (224,704)
Reclassification adjustments to net investment (gains) losses, net of taxes of $(26) and $(108), respectively
96 404 
Change in net unrealized investment gains (losses)62,510 (224,300)
Ending balance$(320,386)$(140,712)
Amounts reclassified out of accumulated other comprehensive income to net investment gains (losses) include realized gains (losses) on sales of securities, which are determined on a specific identification basis.

11

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fixed Maturity Securities Available-For-Sale
As of March 31, 2023, the amortized cost, gross unrealized gains (losses) and fair value of our investment securities were as follows:
(Amounts in thousands)
Amortized
cost
Gross unrealized gainsGross unrealized losses
Fair
value
U.S. government, agencies and GSEs$43,772 $99 $(1,162)$42,709 
State and political subdivisions510,953 2,142 (81,317)431,778 
Non-U.S. government10,571 — (1,078)9,493 
U.S. corporate2,882,422 2,786 (205,723)2,679,485 
Non-U.S. corporate681,986 552 (52,036)630,502 
Residential mortgage-backed10,448 (106)10,344 
Other asset-backed1,196,902 1,133 (72,719)1,125,316 
Total fixed maturity securities available-for-sale$5,337,054 $6,714 $(414,141)$4,929,627 
Short-term investments2,214 — (29)2,185 
Total investments$5,339,268 $6,714 $(414,170)$4,931,812 
As of December 31, 2022, the amortized cost, gross unrealized gains (losses) and fair value of our investment securities were as follows:
(Amounts in thousands)
Amortized
cost
Gross unrealized gains
Gross unrealized losses
Fair
value
U.S. government, agencies and GSEs$46,319 $59 $(1,609)$44,769 
State and political subdivisions515,935 1,815 (97,894)419,856 
Non-U.S. government10,607 — (1,258)9,349 
U.S. corporate2,886,269 1,355 (240,761)2,646,863 
Non-U.S. corporate716,333 158 (63,647)652,844 
Residential mortgage-backed11,162 — (119)11,043 
Other asset-backed1,185,048 462 (85,474)1,100,036 
Total fixed maturity securities available-for-sale$5,371,673 $3,849 $(490,762)$4,884,760 
Short-term investments3,077 — (30)3,047 
Total investments$5,374,750 $3,849 $(490,792)$4,887,807 

12

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Gross Unrealized Losses and Fair Values of Fixed Maturity Securities Available-For-Sale
The following table presents the gross unrealized losses and fair values of our fixed maturity securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of March 31, 2023:
 
Less than 12 months 
12 months or more
Total
(Amounts in thousands)
Fair
value 
Gross unrealized losses
Number of securities
Fair value
Gross unrealized losses
Number of securities
Fair value
Gross unrealized losses
Number of securities
Fixed maturity securities:         
U.S. government, agencies and GSEs$9,024 $(187)$32,152 $(975)11 $41,176 $(1,162)17 
State and political subdivisions30,891 (1,835)380,669 (79,482)82 411,560 (81,317)88 
Non-U.S. government— — — 9,493 (1,078)9,493 (1,078)
U.S. corporate1,104,499 (28,535)292 1,445,412 (177,188)245 2,549,911 (205,723)537 
Non-U.S. corporate255,688 (6,862)77 338,163 (45,174)63 593,851 (52,036)140 
Residential mortgage-backed9,377 (106)— — — 9,377 (106)
Other asset-backed327,606 (5,760)115 716,264 (66,959)155 1,043,870 (72,719)270 
Total for fixed maturity securities in an unrealized loss position$1,737,085 $(43,285)501 $2,922,153 $(370,856)557 $4,659,238 $(414,141)1,058 
We did not recognize an allowance for credit losses on securities in an unrealized loss position included in the table above. Based on a qualitative and quantitative review of the issuers of the securities, we believe the unrealized losses are largely due to changes in interest rates and recent market volatility, and are not indicative of credit losses. The issuers continue to make timely principal and interest payments.
For all securities in an unrealized loss position without an allowance for credit losses, we expect to recover the amortized cost based on our estimate of the amount and timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell these securities prior to recovering our amortized cost.
13

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the gross unrealized losses and fair values of our fixed maturity securities, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of December 31, 2022:
 
Less than 12 months 
12 months or more
Total
(Amounts in thousands)
Fair
value 
Gross unrealized losses
Number of securities
Fair value
Gross unrealized losses
Number of securities
Fair value
Gross unrealized losses
Number of securities
Fixed maturity securities:         
U.S. government, agencies and GSEs$43,873 $(1,600)18 $96 $(9)$43,969 $(1,609)19 
State and political subdivisions203,752 (40,988)43 196,235 (56,906)46 399,987 (97,894)89 
Non-U.S. government— — — 9,349 (1,258)9,349 (1,258)
U.S. corporate2,033,713 (131,150)468 568,171 (109,611)92 2,601,884 (240,761)560 
Non-U.S. corporate486,117 (35,515)125 155,345 (28,132)27 641,462 (63,647)152 
Residential mortgage-backed11,043 (119)— — — 11,043 (119)
Other asset-backed655,525 (31,684)217 375,810 (53,790)71 1,031,335 (85,474)288 
Total for fixed maturity securities in an unrealized loss position$3,434,023 $(241,056)877 $1,305,006 $(249,706)238 $4,739,029 $(490,762)1,115 
Contractual Maturities of Fixed Maturity Securities Available-For-Sale
The scheduled maturity distribution of fixed maturity securities as of March 31, 2023, is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.
(Amounts in thousands)
Amortized
cost
Fair
value
Due one year or less$187,395 $185,488 
Due after one year through five years2,323,642 2,186,748 
Due after five years through ten years1,386,185 1,218,687 
Due after ten years232,482 203,044 
Subtotal4,129,704 3,793,967 
Residential mortgage-backed10,448 10,344 
Other asset-backed1,196,902 1,125,316 
Total fixed maturity securities available-for-sale$5,337,054 $4,929,627 
As of March 31, 2023, securities issued by the finance and insurance, technology and communications, consumer—non-cyclical, and utilities industry groups represented approximately 33%, 13%, 12%, and 10%, respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group comprised more than 9% of our investment portfolio.
As of March 31, 2023, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of equity.
As of March 31, 2023 and December 31, 2022, $25.4 million and $25.1 million, respectively, of securities in our portfolio were on deposit with various state insurance commissioners in order to comply with relevant insurance regulations.

14

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(4)Fair value
Recurring fair value measurements
We hold fixed maturity securities and short-term investments, which are carried at fair value. The fair value of fixed maturity securities and short-term investments are estimated primarily based on information derived from third-party pricing services (“pricing services”), internal models and/or broker quotes, which use a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information. In general, a market approach is utilized if there is readily available and relevant market activity for an individual security. In certain cases where market information is not available for a specific security but is available for similar securities, that security is valued using market information for similar securities, which is also a market approach. When market information is not available for a specific security (or similar securities) or is available but such information is less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For securities with optionality, such as call or prepayment features (including asset-backed securities), an income or combination approach may be used. These valuation techniques may change from period to period, based on the relevance and availability of market data.
Further, while we consider the valuations provided by pricing services and broker quotes to be of high quality, management determines the fair value of our investment securities after considering all relevant and available information.
In general, we first obtain valuations from pricing services. If prices are unavailable for public securities, we obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quotes valuation is available, we determine fair value using internal models. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for similar securities are not readily observable and these securities are not typically valued by pricing services.
Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs, which would result in the valuation being classified as Level 3.
Broker quotes are typically based on an income approach given the lack of available market data. As the valuation typically includes significant unobservable inputs, we classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.
For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads and utilize those in an internal model to determine fair value. Other inputs to the model include rating and weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium, which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We utilize price caps for securities where the estimated market yield results in a valuation that may exceed the amount that would be received in a market transaction. When a security does not have an external rating, we assign the security an internal rating to determine the appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any price caps utilized, liquidity premiums applied, and whether external ratings are available for our private placements to determine whether the spreads utilized would be considered observable inputs. We classify private securities without an external rating or public bond spread as Level 3. In general, a significant increase (decrease) in credit spreads
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
would have resulted in a significant decrease (increase) in the fair value for our fixed maturity securities as of March 31, 2023.
For remaining securities priced using internal models, we determine fair value using an income approach. We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.
Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing and/or rating, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from pricing services to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.
A summary of the inputs used for our fixed maturity securities and short-term investments based on the level in which instruments are classified is included below. We have combined certain classes of instruments together as the nature of the inputs is similar.
Level 1 measurements
There were no fixed maturity securities classified as Level 1 as of March 31, 2023, and December 31, 2022.
Level 2 measurements
Fixed maturity securities:
Third-party pricing services
In estimating the fair value of fixed maturity securities, approximately 89% of our portfolio was priced using third-party pricing services as of March 31, 2023. These pricing services utilize industry-standard valuation techniques that include market-based approaches, income-based approaches, a combination of market-based and income-based approaches or other proprietary, internally generated models as part of the valuation processes. These third-party pricing vendors maximize the use of publicly available data inputs to generate valuations for each asset class. Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of valuation at the time of pricing. Examples of significant inputs incorporated by pricing services may include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data, prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings with our pricing services for the purpose of understanding the methodologies, techniques and inputs used by the third-party pricing providers.
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a summary of the significant inputs used by our pricing services for certain fair value measurements of fixed maturity securities that are classified as Level 2 as of March 31, 2023:
(Amounts in thousands)
Fair value
Primary methodologies
Significant inputs
U.S. government, agencies and GSEs$42,709 Price quotes from trading desk, broker feedsBid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread
State and political subdivisions$431,778 Multi-dimensional attribute-based modeling systems, third-party pricing vendorsTrade prices, material event notices, Municipal Market Data benchmark yields, broker quotes
Non-U.S. government$9,493 Matrix pricing, spread priced to benchmark curves, price quotes from market makersBenchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
U.S. corporate$2,279,530 Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, internal models, OAS-based modelsBid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports
Non-U.S. corporate$483,345 Multi-dimensional attribute-based modeling systems, OAS-based models, price quotes from market makersBenchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
Residential mortgage-backed$10,344 OAS-based models, single factor binomial models, internally pricedPrepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports
Other asset-backed$1,124,332 Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makersSpreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports

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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Internal models
A portion of our Level 2 U.S. corporate and non-U.S. corporate securities are valued using internal models. The fair value of these fixed maturity securities was $183.6 million and $73.0 million, respectively, as of March 31, 2023. Internally modeled securities are primarily private fixed maturity securities where we use market observable inputs such as an interest rate yield curve, published credit spreads for similar securities based on the external ratings of the instrument and related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are established using inputs from market participants.
Short-term investments:
The fair value of short-term investments classified as Level 2 is determined after considering prices obtained by pricing services.
Level 3 measurements
Broker quotes
A portion of our U.S. corporate and other asset-backed securities are valued using broker quotes. Broker quotes are obtained from third-party providers that have current market knowledge to provide a reasonable price for securities not routinely priced by pricing services. Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed maturity securities priced by broker quotes was $3.2 million as of March 31, 2023.
Internal models
A portion of our U.S. corporate and non-U.S. corporate securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $288.3 million as of March 31, 2023.

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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
 March 31, 2023
(Amounts in thousands) 
Total
Level 1
Level 2
Level 3 
Fixed maturity securities:    
U.S. government, agencies and GSEs$42,709 $— $42,709 $— 
State and political subdivisions431,778 — 431,778 — 
Non-U.S. government9,493 — 9,493 — 
U.S. corporate2,679,485 — 2,463,155 216,330 
Non-U.S. corporate630,502 — 556,371 74,131 
Residential mortgage-backed10,344 — 10,344 — 
Other asset-backed1,125,316 — 1,124,332 984 
Total fixed maturity securities4,929,627 — 4,638,182 291,445 
Short-term investments2,185 — 2,185 — 
Total$4,931,812 $ $4,640,367 $291,445 
 December 31, 2022
(Amounts in thousands)
Total
Level 1
Level 2
Level 3 
Fixed maturity securities:    
U.S. government, agencies and GSEs$44,769 $— $44,769 $— 
State and political subdivisions419,856 — 419,856 — 
Non-U.S. government9,349 — 9,349 — 
U.S. corporate2,646,863 — 2,426,237 220,626 
Non-U.S. corporate652,844 — 557,690 95,154 
Residential mortgage-backed11,043 — 11,043 — 
Other asset-backed1,100,036 — 1,096,555 3,481 
Total fixed maturity securities4,884,760 — 4,565,499 319,261 
Short-term investments3,047 — 3,047 — 
Total$4,887,807 $ $4,568,546 $319,261 
We had no liabilities recorded at fair value as of March 31, 2023, and December 31, 2022.
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
 Beginning
balance
as of
January 1, 2023
Total realized and
unrealized gains
(losses) 
Purchases
Sales
Settlements
Transfer
into
Level 3 (1)
Transfer
out of
Level 3 (1)
Ending
balance
as of
March 31, 2023
Total gains
(losses)
attributable to
assets still held
(Amounts in thousands)
Included
in net
income
Included
in OCI
Included
in net
income
Included
in OCI 
Fixed maturity securities:           
U.S. corporate$220,626 $(13)$4,024 $3,000 $(6,899)$(4,408)$— $— $216,330 $(9)$3,749 
Non-U.S. corporate95,154 (725)2,767 3,759 (3,543)(23,281)— — 74,131 1,432 
Other asset-backed3,481 14 — — — — (2,514)984 (4)
Total$319,261 $(735)$6,805 $6,759 $(10,442)$(27,689)$ $(2,514)$291,445 $2 $5,177 
Beginning
balance
as of
January 1, 2022
Total realized and
unrealized gains
(losses) 
Purchases
Sales
Settlements
Transfer
into
Level 3 (1)
Transfer
out of
Level 3 (1)
Ending
balance
as of
March 31, 2022
Total gains
(losses)
attributable to
assets still held
(Amounts in thousands)
Included
in net
income
Included
in OCI
Included
in net
income
Included
in OCI 
Fixed maturity securities:
U.S. corporate$220,733 $(15)$(16,784)$39,969 $— $(440)$— $— $243,463 $(15)$(16,784)
Non-U.S. corporate83,664 (84)(5,337)10,000 — (106)— (3,719)84,418 (84)(5,044)
Other asset-backed24,223 — (1,624)— — — — (22,599)— — — 
Total$328,620 $(99)$(23,745)$49,969 $ $(546)$ $(26,318)$327,881 $(99)$(21,828)
______________
(1)The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads.

Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset but does not represent changes in fair value for the instruments held at the beginning of the period.
The amount presented for realized and unrealized gains (losses) included in net income for fixed maturity securities primarily represents amortization and accretion of premiums and discounts on certain fixed maturity securities recorded within net investment income.
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a summary of the significant unobservable inputs used for certain asset fair value measurements that are based on internal models and classified as Level 3 as of March 31, 2023:
(Amounts in thousands)
Valuation
technique 
Fair value (1)
Unobservable
input 
Range (bps)
Weighted-
average (2) (bps)
Fixed maturity securities:    
U.S. corporateInternal models$214,141 Credit spreads
71 - 357
159
Non-U.S. corporateInternal models$74,131 Credit spreads
100 - 215
152
______________
(1)Certain classes of instruments classified as Level 3 are excluded as a result of not being material or due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker quotes, used as an input in determining fair value.
(2)Unobservable inputs weighted by the relative fair value of the associated instrument.

We have certain financial instruments that are not recorded at fair value, including cash and cash equivalents and accrued investment income, the carrying value of which approximate fair value due to the short-term nature of these instruments and are not included in this disclosure.
Liabilities not required to be carried at fair value
The following represents our estimated fair value of financial liabilities that are not required to be carried at fair value, classified as Level 2, as of the dates indicated:
March 31, 2023December 31, 2022
(Amounts in thousands)
Carrying
amount
Fair value 
Carrying
amount
Fair value 
Long-term borrowings$743,460 $733,298 $742,830 $739,020 
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(5)Loss reserves
Activity for the liability for loss reserves for the three months ended March 31, is summarized as follows:
(Amounts in thousands)
20232022
Loss reserves, beginning balance$519,008 $641,325 
Run-off reserves(678)(681)
Net loss reserves, beginning balance518,330 640,644 
Losses and LAE incurred related to current accident year60,298 41,274 
Losses and LAE incurred related to prior accident years(71,329)(51,707)
Total incurred (1)
(11,031)(10,433)
Losses and LAE paid related to current accident year(137)(4)
Losses and LAE paid related to prior accident years(6,516)(5,613)
Total paid (1)
(6,653)(5,617)
Net loss reserves, ending balance500,646 624,594 
Run-off reserves781 685 
Loss reserves, ending balance$501,427 $625,279 
______________
(1)Losses and loss adjustment expenses (“LAE”) incurred and paid exclude losses related to our run-off business.
The liability for loss reserves represents our current best estimate; however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could possibly be significant, and result in future increases to reserves by amounts that could be material to our results of operations, financial condition and liquidity.
Losses incurred related to insured events of the current accident year relate to defaults that occurred in that year and represent the estimated ultimate amount of losses to be paid on such defaults. Losses incurred related to insured events of prior accident years represent the (favorable) or unfavorable development of reserves as a result of the actual rates at which delinquencies go to claim (“claim rates”) and claim amounts being different than those we estimated when originally establishing the reserves. Such estimates are based on our historical experience, which we believe is representative of expected future losses at the time of estimation. As a result of the extended period of time that may exist between the reporting of a delinquency and the claim payment, as well as changes in economic conditions and the real estate market, significant uncertainty and variability exist on amounts ultimately paid.
A portion of delinquencies in the periods presented were from borrowers participating in deferred or reduced payments (“forbearance”) as a result of COVID-19. When establishing loss reserves for borrowers in forbearance from 2020 to 2022, we assumed a lower rate of delinquencies becoming active claims, which had the effect of producing a lower reserve compared to delinquencies that were not in forbearance. Historical experience with localized natural disasters, such as hurricanes, indicates a higher cure rate for borrowers in forbearance. Loss reserves recorded on these new delinquencies have a high
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments as well as the timing and severity of those payments.
For the three months ended March 31, 2023, losses and LAE incurred of $60 million related to insured events of the current accident year was primarily attributable to new delinquencies.
We also recorded favorable adjustments on prior accident year reserves of $70 million, which were primarily driven by cure performance of delinquencies from 2020 and 2021 related to COVID-19. During the peak of COVID-19, we experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have continued to perform at levels above our reserve expectations. During the first three months of 2022, we released $50 million of reserves primarily related to COVID-19 delinquencies from 2020.
(6)Reinsurance
We reinsure a portion of our policy risks in order to reduce our ultimate losses, diversify our exposures and comply with regulatory requirements. We also assume certain policy risks written by other companies.
Reinsurance does not relieve us from our obligations to policyholders. In the event that the reinsurers are unable to meet their obligations, we remain liable for the reinsured claims. We monitor both the financial condition of individual reinsurers and risk concentrations arising from similar geographic regions, activities and economic characteristics of reinsurers to lessen the risk of default by such reinsurers.
The following table sets forth the effects of reinsurance on premiums written and earned for the periods indicated:
Three months ended
March 31,
(Amounts in thousands)
20232022
Net premiums written:
Direct$240,939 $242,605 
Assumed59 68 
Ceded(19,927)(18,302)
Net premiums written$221,071 $224,371 
Net premiums earned:
Direct$254,976 $252,513 
Assumed59 68 
Ceded(19,927)(18,302)
Net premiums earned$235,108 $234,279 
The difference between written premiums of $221.1 million and earned premiums of $235.1 million represents the decrease in unearned premiums for the three months ended March 31, 2023. The decrease in unearned premiums was primarily the result of policy cancellations in our single premium mortgage insurance product.
Excess-of-loss reinsurance
We engage in excess-of-loss (“XOL”) insurance transactions either through a panel of traditional reinsurance providers or through collateralized reinsurance with unaffiliated special purpose insurers (“Triangle Re Entities”). During the respective coverage periods of these agreements, EMICO retains the
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
first layer of aggregate loss exposure on covered policies while the reinsurer provides the second layer of coverage, up to the defined reinsurance coverage amount. EMICO retains losses in excess of the respective reinsurance coverage amount.
The Triangle Re Entities fully collateralize their coverage by issuing insurance-linked notes (“ILNs”) to eligible capital market investors in unregistered private offerings. Traditional reinsurance providers collateralize a portion of their coverage by holding funds in trust. We believe that the risk transfer requirements for reinsurance accounting were met as these excess of loss insurance transactions assume significant insurance risk and a reasonable possibility of significant loss.
EMICO has rights to terminate the ILNs or traditional XOL reinsurance agreements upon the occurrence of certain events.
The following table presents the issue date, policy dates, initial and current first layer retained aggregate loss and initial and current reinsurance coverage amount under each reinsurance transaction. Current amounts are presented as of March 31, 2023:
Mortgage insurance-linked notes
(Amounts in millions)Issue datePolicy datesInitial first layer retained lossCurrent first layer retained lossInitial reinsurance coverageCurrent reinsurance coverage
Triangle Re 2020-1 Ltd.10/22/20201/01/2020 - 8/31/2020$522$521$350$47
Triangle Re 2021-1 Ltd.3/02/20211/01/2014 - 12/31/2018, 10/01/2019 - 12/31/2019$212$212$495$126
Triangle Re 2021-2 Ltd.4/16/20219/01/2020 - 12/31/2020$189$188$303$227
Triangle Re 2021-3 Ltd.9/02/20211/01/2021 - 6/30/2021$304$303$372$328
Total$728
Traditional excess-of-loss reinsurance
(Amounts in millions)Issue datePolicy datesInitial first layer retained lossCurrent first layer retained lossInitial reinsurance coverageCurrent reinsurance coverage
2020 XOL1/01/20201/01/2020 - 12/31/2020$691$691$168$44
2021 XOL2/04/20211/01/2021 - 12/31/2021$671$671$206$180
2022-1 XOL1/27/20221/01/2022 - 12/31/2022$462$462$196$196
2022-2 XOL1/27/20221/01/2022 - 12/31/2022$385$385$25$25
2022-3 XOL3/24/20227/01/2021 - 12/31/2021$317$317$289$281
2022-4 XOL3/24/20227/01/2021 - 12/31/2021$264$264$36$36
2022-5 XOL 9/15/20221/01/2022 - 6/30/2022$256$256$201$193
2023-1 XOL3/08/20231/01/2023 - 12/31/2023$98$98$43$43
Total$998
On March 8, 2023, we executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to $180 million of reinsurance coverage on a portion of current and expected new insurance written for the 2023 book year, effective January 1, 2023.

(7)Borrowings
In 2020, we issued $750 million aggregate principal amount of 6.5% senior notes due in 2025 (the “2025 Senior Notes”). Interest on the 2025 Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year. The 2025 Senior Notes mature on August 15, 2025.
24

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table sets forth long-term borrowings as of the dates indicated:
(Amounts in thousands)March 31,
2023
December 31,
2022
6.5% Senior Notes, due 2025
$750,000 $750,000 
Deferred borrowing charges(6,540)(7,170)
Total$743,460 $742,830 
Revolving Credit Agreement
On June 30, 2022, we entered into a credit agreement with a syndicate of lenders that provides for a five-year, unsecured revolving credit facility (the “Facility”) in the initial aggregate principal amount of $200 million, including the ability for EHI to increase the commitments under the Facility, on an uncommitted basis, by an additional aggregate principal amount of up to $100 million. Borrowings under the Facility will accrue interest at a floating rate tied to a standard short-term borrowing index, selected at EHI’s option, plus an applicable margin. The applicable margin is based on the ratings established by certain debt rating agencies for EHI’s senior unsecured debt.
We may use borrowings under the Facility for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries. The Facility contains several covenants, including financial covenants relating to minimum net worth, capital and liquidity levels, maximum debt to capitalization level and PMIERs compliance. We are in compliance with all covenants of the Facility and the Facility remained undrawn as of March 31, 2023.
(8)Income taxes
We compute the provision for income taxes on a separate return with benefits-for-loss method. If during the three-month periods ended March 31, 2023 and 2022, we had computed taxes using the separate return method, the provision for income taxes would have been unchanged.
(9)Related party transactions
We have various agreements with Genworth that provide for reimbursement to and from Genworth of certain administrative and operating expenses that include, but are not limited to, information technology services and administrative services (such as finance, human resources and employee benefit administration). These agreements provide for an allocation of corporate expenses to all Genworth businesses or subsidiaries. We incurred costs for these services of $4.7 million and $7.8 million for the three months ended March 31, 2023 and 2022, respectively.
The investment portfolios of our insurance subsidiaries are managed by Genworth. Under the terms of the investment management agreement, we are charged a fee by Genworth. All fees paid to Genworth are charged to investment expense and are included in net investment income in the condensed consolidated statements of income. The total investment expenses paid to Genworth were $1.6 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively.
Our employees participate in certain benefit plans sponsored by Genworth and certain share-based compensation plans that utilize shares of Genworth common stock and other incentive plans.
We provide certain information technology and administrative services (such as facilities and maintenance) to Genworth. We charged Genworth $0.1 million and $0.2 million for these services for the three months ended March 31, 2023 and 2022, respectively.
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ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We have a tax sharing agreement in place with Genworth, such that we participate in a single U.S. consolidated income tax return filing. All intercompany balances related to this agreement are settled at least annually.
The condensed consolidated financial statements include the following amounts due to and from Genworth relating to recurring service and expense agreements as of:
(Amounts in thousands)
March 31, 2023December 31, 2022
Amounts payable to Genworth$8,910 $9,291 
Amounts receivable from Genworth$153 $167 
(10)Net income per common share
The basic earnings per share computation is based on the weighted average number of shares of common stock outstanding. For the three months ended March 31, 2023 and 2022, the calculation of dilutive weighted average shares considers the impact of restricted stock units and performance stock units issued to employees as well as deferred stock units issued to our directors.
The calculation of basic and diluted net income per share is as follows:
Three months ended
March 31,
(Amounts in thousands, except per share amounts)20232022
Net income available to EHI common stockholders$175,988 $164,630 
Net income per common share:
Basic$1.08 $1.01 
Diluted$1.08 $1.01 
Weighted average common shares outstanding:
Basic162,442 162,841 
Diluted163,179 163,054 
26

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(11)Changes in accumulated other comprehensive income
The following tables present a roll forward of accumulated other comprehensive income for the three months indicated:
(Amounts in thousands)Net unrealized
investment
gains (losses)
Foreign currency translationTotal
Balance as of January 1, 2023, net of tax$(382,896)$152 $(382,744)
Other comprehensive income (loss) before reclassifications62,414 (8)62,406 
Amounts reclassified from other comprehensive income (loss)96 — 96 
Total other comprehensive income (loss)62,510 (8)62,502 
Balance as of March 31, 2023, net of tax$(320,386)$144 $(320,242)
(Amounts in thousands)Net unrealized
investment
gains (losses)
Foreign currency translationTotal
Balance as of January 1, 2022, net of tax$83,588 $(7)$83,581 
Other comprehensive income (loss) before reclassifications(223,896)29 (223,867)
Amounts reclassified from other comprehensive income (loss)(404)— (404)
Total other comprehensive income (loss)(224,300)29 (224,271)
Balance as of March 31, 2022, net of tax$(140,712)$22 $(140,690)
The following table presents the effect of the reclassifications of significant items out of accumulated other comprehensive income on the respective line items of the consolidated statements of income, for the periods indicated:
 
Amount reclassified from accumulated other comprehensive income
Affected line item in the condensed consolidated statements of income
Three months ended
March 31,
(Amounts in thousands)
20232022
Net unrealized gains (losses) on investments$(122)$(512)Net investment gains (losses)
Benefit (expense) from income taxes26 108 Provision for income taxes
(12)Stockholders’ equity
Share Repurchase Program
On November 1, 2022, our Board of Directors approved a share repurchase program authorizing the Company to spend up to $75 million, excluding commissions, to repurchase EHI common stock in the open market or in privately negotiated transactions, based on market and business conditions, stock price and other factors. EHI generally operates its share repurchase programs pursuant to a trading plan under
27

ENACT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Rule 10b5-1 of the Exchange Act, which permits the Company to purchase shares, at predetermined price targets, when it may otherwise be precluded from doing so. During the three months ended March 31, 2023, the Company purchased 916,776 shares at an average price of $24.19 per share, including commissions. As of March 31, 2023, $51.3 million remained available under this program. All treasury stock has been retired as of March 31, 2023.
Subsequent to quarter end, the Company purchased 353,416 shares at an average price of $23.73 through April 30, 2023.
Cash Dividends
In the first quarter of 2023, we paid a quarterly cash dividend of $0.14 per share. There were no dividends paid during the first quarter of 2022. Subsequent to quarter end, we announced our next quarterly dividend would be $0.16 per share and paid in June 2023.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes for the three months ended March 31, 2023 and 2022, and our audited consolidated financial statements and related notes for the years ended December 31, 2022 and 2021 within our Annual Report on Form 10-K for the fiscal year ending December 31, 2022 (the “Annual Report”).
In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” above and Part I, Item 1A “Risk Factors” in our Annual Report. Future results could differ significantly from the historical results presented in this section. References to “EHI,” “Enact,” “Enact Holdings,” the “Company,” “we” or “our” herein are, unless the context otherwise requires, to EHI on a consolidated basis.
Key Factors Affecting Our Results
There have been no material changes to the factors affecting our results, as compared to those disclosed in the Annual Report, other than the impact of items as discussed below in “—Trends and Conditions”.
Trends and Conditions
During the first quarter of 2023, the United States economy experienced continued volatility due to inflationary pressure, the geopolitical environment and general market uncertainty. Markets have also felt the ramifications of distress in the banking industry, including high profile bank closures. While turmoil within the banking sector has not directly permeated the housing market to date, it has caused concerns across the broader economy.
Inflationary pressures continued to lessen in the first quarter of 2023, but remain elevated with the Bureau of Labor Statistics reporting in March that the Consumer Price Index was 5.0% year-over-year. The Federal Reserve has taken an aggressive approach towards addressing inflation through interest rate increases and a reduction of its balance sheet. The Federal Reserve approved 25 basis point increases in interest rates in both May and March 2023 that followed eight interest rate increases in 2022. Over this timeframe, financial markets have reacted with increased volatility and rates have increased across the Treasury yield curve.
Mortgage origination activity remained slow during the first quarter of 2023 in response to rising mortgage rates throughout 2022. The refinance market is likely to remain low in the near to mid-term as the Federal Reserve has not signaled any intent to reduce interest rates. Housing affordability remains challenged due to higher interest rates and elevated home prices, modestly offset by rising median family income according to the National Association of Realtors Housing Affordability Index. After sustained periods of strong home price appreciation, national housing prices began to decline in late 2022, but stabilized during the first quarter of 2023, according to the FHFA Monthly Purchase-Only House Price Index.
The unemployment rate as of March 31, 2023 was 3.5%, consistent with the fourth quarter of 2022. As of March 31, 2023, the number of unemployed Americans stands at approximately 5.8 million and the number of long-term unemployed Americans (over 26 weeks out of the workforce) was approximately 1.1 million. Both metrics remain relatively in line with February 2020 levels.
For mortgages insured by the federal government (including those purchased by Fannie Mae and Freddie Mac), forbearance allows borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits. An initial forbearance period is typically up to six
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months and can be extended for another six months if requested by the borrower to its mortgage servicer. However, the Biden Administration ended the national emergency for COVID-19 in April 2023, so the deadlines for requesting a COVID-19 related forbearance under the CARES Act will end in August of 2023. At present, the GSEs’ COVID-19 related policies, including with respect to forbearance, remain in effect. Further, in March 2023 the GSEs announced new loss mitigation programs that would allow for six-month payment deferrals for borrowers facing financial hardship. Servicers are encouraged to start evaluating borrowers for the new mitigation programs as early as July 1, 2023, but no later than October 1, 2023. Even though most foreclosure moratoriums expired at the end of 2021, federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend the foreclosure timeline, which could negatively impact the severity of loss on loans that go to claim.
Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer-reported forbearances have generally declined. As of March 31, 2023, approximately 1.4%, or 13,678, of our active primary policies were reported in a forbearance plan, of which approximately 34% were reported as delinquent.
Total delinquencies decreased during the first quarter of 2023 as a result of cures outpacing new delinquencies, which decreased modestly during the quarter. The new delinquency rate for the first quarter of 2023 was 1.0%, down slightly from the fourth quarter of 2022.
The full impact of COVID-19 and its ancillary economic effects on our future business results continue to be difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan may not be known for several quarters. We continue to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated and delinquencies have declined, it is possible that COVID-19 could have an adverse impact on our future results of operations and financial condition.
The Federal Housing Finance Agency (“FHFA”) and the GSEs are focused on increasing the accessibility and affordability of homeownership, in particular for low- and moderate-income borrowers and underserved minority communities. In June 2022, the FHFA announced the release of Fannie Mae’s and Freddie Mac’s respective Equitable Housing Finance Plans. In April, 2023, FHFA announced updates to Fannie Mae and Freddie Mac’s Equitable Housing Finance Plans which build upon the inaugural plans first announced last year and make adjustments based on initial research and findings. The proposals included many initiatives, including language discussing potential changes that could impact the mortgage insurance industry. We will continue to work with the FHFA, the GSEs, and the broader housing finance industry as these proposals develop and to the extent they are implemented. We cannot predict whether or when any new practices or programs will be implemented under the GSEs’ Equitable Housing Finance Plans or other affordability initiatives, and if so in what form, nor can we predict what effect, if any, such practices or programs may have on our business, results of operations or financial condition.
Private mortgage insurance market penetration and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the Federal Housing Administration (“FHA”) and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products.
On October 24, 2022, the FHFA announced two initiatives: 1) targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain borrowers and affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans; and 2) the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by the GSEs as well as changing the requirement that lenders provide credit reports from
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all three nationwide consumer reporting agencies and instead only requiring credit reports from two of the three nationwide credit reporting agencies.
The upfront fees were eliminated for certain first-time home buyers with income at or below area median income and certain other GSE affordable housing products. The fee reductions went into effect in the fourth quarter of 2022, while the new fees on cash-out refinance loans began on February 1, 2023. We expect these price changes to be a net positive to the mortgage insurance market, but we believe the impact is limited to date. The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs. The FHFA has announced preliminary implementation expectations, but this is expected to be a multiple year process that will require system and process updates along with coordination across stakeholders of the industry.
In January 2023, the FHFA announced additional updates to its upfront fee structure and a recalibration and reformatting of their entire pricing matrix. The changes marked the third iteration of the FHFA’s ongoing pricing review since early last year and impact purchase and rate-term refinance loans. Pricing grids are now broken out by loan purpose and are recalibrated to new credit score and loan-to-value ratio categories along with associated loan attributes. The new pricing matrix also includes new upfront fees for loans with debt to income (“DTI”) ratios greater than 40%. Some changes became effective May 1, 2023 and the adjustments related to DTI ratios were delayed until August 2023. The effects of these changes will ultimately be dependent on any changes made by the FHA, but we do not expect a significant impact to the private mortgage insurance market.
On February 22, 2023, the Department of Housing and Urban Development announced a 30-basis point reduction of the annual insurance premium charged to borrowers with FHA-insured mortgages. This action is designed to reduce the cost of borrowing for lower- and middle-class homebuyers who are eligible for the federal program. The price reduction, which went into effect on March 20, 2023, is expected to have a negative impact on the private mortgage insurance market, but will be partially offset by the effects of the recent FHFA pricing changes referenced above. We do not believe this net impact will be material.
The U.S. private mortgage insurance industry is highly competitive. Our market share is influenced by the execution of our go to market strategy, including but not limited to, pricing competitiveness relative to our peers and our selective participation in forward commitment transactions. We continue to manage the quality of new business through pricing and our underwriting guidelines, which are modified from time to time when circumstances warrant. We see the market and underwriting conditions, including the pricing environment, as being within our risk-adjusted return appetite enabling us to write new business at attractive returns. Ultimately, we expect our new insurance written with its strong credit profile and attractive pricing to positively contribute to our future profitability and return on equity.
New insurance written of $13.2 billion in the first quarter of 2023 decreased 30% compared to the first quarter of 2022 primarily due to a decline in originations driven by elevated mortgage rates.
Our primary persistency rate increased to 85% during the first quarter of 2023 compared to 76% during the first quarter of 2022. The increase in persistency was primarily driven by a decline in the percentage of our in-force policies with mortgage rates above current mortgage rates. Elevated persistency has offset the decline in new insurance written in the first quarter of 2023, leading to an increase in primary insurance in-force (“IIF”) of $4.3 billion since December 31, 2022.
Net earned premiums increased slightly in the first quarter of 2023 compared to the first quarter of 2022 primarily as a result of insurance in-force growth, partially offset by the lapse of older, higher priced policies and a decrease in single premium cancellations. The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 as forbearance exits continue and new forbearances declined. During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default and we refund the post-delinquent premiums to the insured party if the delinquent loan goes to claim. We record a liability and a reduction to net earned
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premiums for the post-delinquent premiums we expect to refund. The post-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through the first quarter of 2023 was not significant to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which delinquencies go to claim for these loans.
Our loss ratio for the three months ended March 31, 2023, was (5)% as compared to (4)% for the three months ended March 31, 2022. Both periods were impacted by favorable reserve adjustments. In the first quarter of 2023, we released $70 million of reserves on delinquencies from prior years, primarily related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021. During the peak of COVID-19, we experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have continued to cure at levels above our reserve expectations, which was a primary driver of the release of reserves in the first quarter of 2023. A similar trend impacted the first quarter of 2022, where we recorded a $50 million reserve release primarily related to 2020 delinquencies.
Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job, continue to take advantage of available loss mitigation options, including forbearance programs, payment deferral options and other modifications. Loss reserves recorded on these delinquencies have a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments, as well as the timing and severity of those payments.
The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated, in part, by embedded home price appreciation. For loans insured on or after October 1, 2014, our mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.
New delinquencies in the first quarter of 2023 increased compared to the first quarter of 2022. Current period primary delinquencies of 9,599 contributed $58 million of loss expense in the first quarter of 2023. We incurred $39 million of losses from 8,724 current period delinquencies in the first quarter of 2022. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions. Approximately 17% of our primary new delinquencies in the first quarter of 2023 were subject to a forbearance plan as compared to 27% in the first quarter of 2022. Due to the declining number of new delinquencies in forbearance, we no longer differentiate the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance.
As of March 31, 2023, EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), EMICO’s domestic insurance regulator, was approximately 12.7:1, compared with a risk-to-capital ratio of 12.9:1 and 12.1:1 as of December 31, 2022, and March 31, 2022, respectively. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business or capital support provided.
Under PMIERs, we are subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. Since 2020, the GSEs have issued several amendments to PMIERs, which implemented both permanent and temporary revisions.
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For loans that became non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) had an initial missed monthly payment occurring on or after March 1, 2020, and prior to April 1, 2021, or (ii) is subject to a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount factor for the non-performing loan is the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier was applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period. The PMIERs amendment dated June 30, 2021 further allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021 to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remains in forbearance.
In September 2020, subsequent to the issuance of our senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on our business. In May 2021, in connection with their conditional approval of the then potential partial sale of EHI, the GSEs confirmed the GSE Restrictions would remain in effect until certain conditions (“GSE Conditions”) were met. These conditions were met as of December 31, 2022 and the GSEs have confirmed that Enact is no longer subject to GSE Restrictions and Conditions.
Prior to the satisfaction of the GSE Conditions, the GSE Restrictions required EMICO to maintain 120% of PMIERs minimum required assets through 2022 and 125% thereafter, and EHI to retain $300 million of net proceeds from the 2025 Senior Notes offering that could be drawn down exclusively for debt service of those notes or to contribute to EMICO to meet its regulatory capital needs including PMIERs. The removal of the GSE Restrictions and GSE Conditions enhances our financial flexibility and competitiveness by no longer making us subject to more stringent capital requirements than our peers.
As of March 31, 2023, we had estimated available assets of $5,357 million against $3,259 million net required assets under PMIERs compared to available assets of $5,206 million against $3,156 million net required assets as of December 31, 2022. The sufficiency ratio as of March 31, 2023, was 164%, or $2,098 million, above the PMIERs requirements, compared to 165%, or $2,050 million, above the PMIERs requirements as of December 31, 2022. PMIERs sufficiency as of December 31, 2022 was based on the published requirements applicable to private mortgage insurers and did not give effect to the GSE Restrictions previously imposed on our business. PMIERs sufficiency for the quarter was relatively flat as an increase in available assets and impact of a current quarter CRT transaction were mostly offset by NIW and amortization of existing reinsurance transactions. Our PMIERs required assets as of March 31, 2023, and December 31, 2022, benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided $120 million of benefit to our March 31, 2023 PMIERs required assets compared to $132 million of benefit as of December 31, 2022. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.
On February 16, 2023 S&P Global Ratings upgraded the long-term financial strength and issuer credit ratings of EMICO from BBB to BBB+. Moody’s Investors Service also upgraded the insurance financial strength rating of EMICO from Baa1 to A3 on March 1, 2023. Subsequent to quarter end on April 25, 2023, Fitch upgraded the insurance financial strength rating of EMICO from BBB+ to A-. These ratings reflect our continued strong performance including our credit profile, market position, profitability, capital adequacy and financial flexibility.
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On March 8, 2023, we executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to $180 million of reinsurance coverage on a portion of current and expected new insurance written for the 2023 book year, effective January 1, 2023.
On April 26, 2022, our Board of Directors approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend. We paid quarterly dividends of $0.14 per share in March of 2023 and May, September and December of 2022. On May 1, 2023 we announced an increase of our next quarterly dividend to $0.16 per share to be paid in June 2023. Future dividend payments are subject to quarterly review and approval by our Board of Directors and Genworth, and will be targeted to be paid in the third month of each subsequent quarter. In April 2023, our primary mortgage insurance operating company, EMICO, completed a distribution to EHI that supports our ability to pay a quarterly dividend. We intend to use these proceeds and future EMICO distributions to fund the quarterly dividend as well as to bolster our financial flexibility and potentially return additional capital to shareholders.
Returning capital to shareholders, balanced with our growth and risk management priorities, remains a key commitment as we look to drive shareholder value through time. Future return of capital will be shaped by our capital prioritization framework: supporting our existing policyholders, growing our mortgage insurance business, funding attractive new business opportunities and returning capital to shareholders. Our total return of capital will also be based on our view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

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Results of Operations and Key Metrics
Results of Operations
Three months ended March 31, 2023, compared to three months ended March 31, 2022
The following table sets forth our consolidated results for the periods indicated:
 Three months ended
March 31,
Increase (decrease)
and percentage
change
(Amounts in thousands)
20232022
2023 vs. 2022
Revenues:   
Premiums$235,108 $234,279 $829— %
Net investment income45,341 35,146 10,19529 %
Net investment gains (losses)(122)(339)217(64)%
Other income612 502 11022 %
Total revenues280,939 269,588 11,351%
Losses and expenses: 
Losses incurred(10,984)(10,446)(538)%
Acquisition and operating expenses, net of deferrals51,705 54,262 (2,557)(5)%
Amortization of deferred acquisition costs and intangibles2,640 3,090 (450)(15)%
Interest expense13,065 12,776 289%
Total losses and expenses56,426 59,682 (3,256)(5)%
Income before income taxes224,513 209,906 14,607%
Provision for income taxes48,525 45,276 3,249%
Net income$175,988 $164,630 $11,358%
Loss ratio (1)
(5)%(4)%  
Expense ratio (2)
23 %24 %  
_______________
(1)Loss ratio is calculated by dividing losses incurred by net earned premiums.
(2)Expense ratio is calculated by dividing acquisition and operating expenses, net of deferrals, plus amortization of deferred acquisition costs and intangibles by net earned premiums.
Revenues
Premiums increased slightly primarily as a result of insurance in-force growth, partially offset by the lapse of older, higher priced policies and a decrease in single premium cancellations.
Net investment income increased from higher yields as a result of rising interest rates and higher average invested assets partially offset by lower income from bond calls.
Net investment losses in the first quarter of 2023 and the first quarter of 2022 were driven by realized losses from sales.
Losses and expenses
Losses incurred during the first quarter of 2023 decreased due to prior year development. We continued to experience better than expected performance on delinquencies primarily from 2020 and 2021 related to COVID-19, contributing to a reserve release of $70 million on prior years. This compares to a $50 million reserve release related to 2020 delinquencies recorded in the first quarter of 2022. Current period primary delinquencies of 9,599 contributed $58 million of loss expense in the three months
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ended March 31, 2023. This compares to $39 million of loss expense from 8,724 primary delinquencies in the first quarter of 2022.
The following table shows incurred losses related to current and prior accident years for the three months ended March 31,:
(Amounts in thousands)
20232022
Losses and LAE incurred related to current accident year$60,298 $41,274 
Losses and LAE incurred related to prior accident years(71,329)(51,707)
Total incurred (1)
$(11,031)$(10,433)
_______________
(1)Excludes run-off business.
Acquisition and operating expenses, net of deferrals, decreased for the three months ended March 31, 2023, as a result of declines in corporate overhead and variable costs.
The expense ratio decreased slightly in the current quarter due to a decline in expenses and premiums staying relatively flat.
Interest expense primarily relates to our 2025 Senior Notes. For additional details see Note 7 to our unaudited condensed consolidated financial statements for the three months ended March 31, 2023 and 2022.
Provision for income taxes
The effective tax rate was 21.6% for both the three months ended March 31, 2023 and 2022, consistent with the United States corporate federal income tax rate.
Use of Non-GAAP Financial Measures
We use a non-U.S. GAAP (“non-GAAP”) financial measure entitled “adjusted operating income.” This non-GAAP financial measure aligns with the way our business performance is evaluated by both management and our Board of Directors. This measure has been established in order to increase transparency for the purposes of evaluating our core operating trends and enabling more meaningful comparisons with our peers. Although “adjusted operating income” is a non-GAAP financial measure, for the reasons discussed above we believe this measure aids in understanding the underlying performance of our operations. Our senior management, including our chief operating decision maker (who is our Chief Executive Officer), use “adjusted operating income” as the primary measure to evaluate the fundamental financial performance of our business and to allocate resources.
“Adjusted operating income” is defined as U.S. GAAP net income excluding the effects of (i) net investment gains (losses) and (ii) restructuring costs and infrequent or unusual non-operating items.
(i)Net investment gains (losses) — The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities or exposure management. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized gains and losses. We do not view them to be indicative of our fundamental operating activities. Therefore, these items are excluded from our calculation of adjusted operating income.
(ii)Restructuring costs and infrequent or unusual non-operating items are also excluded from adjusted operating income if, in our opinion, they are not indicative of overall operating trends.
In reporting non-GAAP measures in the future, we may make other adjustments for expenses and gains we do not consider reflective of core operating performance in a particular period. We may disclose
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other non-GAAP operating measures if we believe that such a presentation would be helpful for investors to evaluate our operating condition by including additional information.
Adjusted operating income is not a measure of total profitability, and therefore should not be considered in isolation or viewed as a substitute for U.S. GAAP net income. Our definition of adjusted operating income may not be comparable to similarly named measures reported by other companies, including our peers.
Adjustments to reconcile net income to adjusted operating income assume a 21% tax rate (unless otherwise indicated).
The following table includes a reconciliation of net income to adjusted operating income for the periods indicated:
Three months ended
March 31,
(Amounts in thousands)
20232022
Net income$175,988 $164,630 
Adjustments to net income:
Net investment (gains) losses122 339 
Costs associated with reorganization(583)222 
Taxes on adjustments97 (118)
Adjusted operating income$175,624 $165,073 
Adjusted operating income increased for the three months ended March 31, 2023, as compared to March 31, 2022, primarily due to higher investment income, driven by increased yields and lower expenses.
Key Metrics
Management reviews the key metrics included within this section when analyzing the performance of our business. The metrics provided in this section exclude activity related to our run-off business, which is immaterial to our consolidated results.
The following table sets forth selected operating performance measures on a primary basis as of or for the periods indicated:
Three months ended
March 31,
(Dollar amounts in millions)
20232022
New insurance written$13,154$18,823
Primary insurance in-force(1)
$252,516$231,853
Primary risk in-force$64,106$58,295
Persistency rate85 %76 %
Policies in-force (count)965,544941,689
Delinquent loans (count)18,63322,571
Delinquency rate1.93 %2.40 %
_______________
(1)Represents the aggregate unpaid principal balance for loans we insure.
New insurance written (“NIW”)
NIW for the three months ended March 31, 2023. decreased 30% compared to the three months ended March 31, 2022. The decrease was primarily due to lower originations in the current period largely
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driven by elevated mortgage rates. We manage the quality of new business through pricing and our underwriting guidelines, which we modify from time to time as circumstances warrant.
The following table presents NIW by product for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
Primary$13,154 100 %$18,823 100 %
Pool— — — — 
Total$13,154 100 %$18,823 100 %

The following table presents primary NIW by underlying type of mortgage for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
Purchases$12,761 97 %$17,326 92 %
Refinances393 1,497 
Total$13,154 100 %$18,823 100 %

The following table presents primary NIW by policy payment type for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
Monthly$12,809 97 %$17,071 91 %
Single318 1,690 
Other27 — 62 — 
Total$13,154 100 %$18,823 100 %
We have seen a decline in NIW on single policies as a result of a potential reduction in the market for single policies driven by higher mortgage rates.
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The following table presents primary NIW by FICO score for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
Over 760$6,004 46 %$8,359 45 %
740-7592,268 17 3,085 16 
720-7391,817 14 2,515 13 
700-7191,296 10 1,952 10 
680-699954 1,316 
660-679 (1)
517 931 
640-659229 486 
620-63965 — 173 
<620— — 
Total$13,154 100 %$18,823 100 %
______________
(1)Loans with unknown FICO scores are included in the 660-679 category.

LTV ratio is calculated by dividing the original loan amount, excluding financed premium, by the property’s acquisition value or fair market value at the time of origination. The following table presents primary NIW by LTV ratio for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
95.01% and above$2,106 16 %$3,146 17 %
90.01% to 95.00%4,928 38 6,682 35 
85.01% to 90.00%4,390 33 5,620 30 
85.00% and below1,730 13 3,375 18 
Total$13,154 100 %$18,823 100 %
DTI ratio is calculated by dividing the borrower’s total monthly debt obligations by total monthly gross income. The following table presents primary NIW by DTI ratio for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
45.01% and above$3,538 27 %$4,452 24 %
38.01% to 45.00%4,940 38 6,361 34 
38.00% and below4,676 35 8,010 42 
Total$13,154 100 %$18,823 100 %
We have seen an increase in concentrations of loans with higher DTI ratios. This is in line with market trends as rising mortgage rates and recent home price appreciation have put pressure on affordability. We believe the levels are in line with our current risk appetite as we consider layered risk across multiple risk attributes, pricing and our portfolio credit mix.
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Insurance in-force (“IIF”) and Risk in-force (“RIF”)
IIF increased as a result of NIW. Higher interest rates and the low refinance market led to lower lapse and cancellations during the first quarter of 2023 driving increased persistency. The primary persistency rate was 85% and 76% for the three months ended March 31, 2023 and 2022, respectively. RIF increased primarily as a result of higher IIF.
The following table sets forth IIF and RIF as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
Primary IIF$252,516 100 %$248,262 100 %$231,853 100 %
Pool IIF486 — 505 — 600 — 
Total IIF$253,002 100 %$248,767 100 %$232,453 100 %
Primary RIF$64,106 100 %$62,791 100 %$58,295 100 %
Pool RIF76 — 79 — 97 — 
Total RIF$64,182 100 %$62,870 100 %$58,392 100 %

The following table sets forth primary IIF and primary RIF by origination as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
Purchases IIF$214,339 85 %$207,827 84 %$184,080 79 %
Refinances IIF38,177 15 40,435 16 47,773 21 
Total IIF$252,516 100 %$248,262 100 %$231,853 100 %
Purchases RIF$55,870 87 %$54,165 86 %$48,326 83 %
Refinances RIF8,236 13 8,626 14 9,969 17 
Total RIF$64,106 100 %$62,791 100 %$58,295 100 %

The following table sets forth primary IIF and primary RIF by product as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
Monthly IIF$221,482 88 %$216,831 87 %$200,304 86 %
Single IIF28,918 11 29,275 12 29,198 13 
Other IIF2,116 2,156 2,351 
Total IIF$252,516 100 %$248,262 100 %$231,853 100 %
Monthly RIF$57,289 89 %$55,879 89 %$51,153 88 %
Single RIF6,284 10 6,370 10 6,561 11 
Other RIF533 542 581 
Total RIF$64,106 100 %$62,791 100 %$58,295 100 %
40



The following table sets forth primary IIF by policy year as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
2008 and prior$6,377 %$6,596 %$7,723 %
2009 to 20154,659 5,025 6,906 
20165,744 6,296 8,076 
20176,201 6,495 8,023 
20186,570 6,839 8,306 
201915,691 16,352 19,609 
202052,389 21 55,358 22 65,807 28 
202179,377 31 81,724 33 88,757 38 
202262,481 25 63,577 25 18,646 
202313,027 — — — — 
Total$252,516 100 %$248,262 100 %$231,853 100 %

The following table sets forth primary RIF by policy year as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
2008 and prior$1,643 %$1,699 %$1,991 %
2009 to 20151,238 1,341 1,846 
20161,538 1,681 2,147 
20171,632 1,708 2,094 
20181,672 1,736 2,092 
20193,989 4,143 4,935 
202013,484 21 14,158 22 16,606 28 
202119,917 31 20,418 32 21,959 38 
202215,647 24 15,907 25 4,625 
20233,346 — — — — 
Total$64,106 100 %$62,791 100 %$58,295 100 %

The following table presents the development of primary IIF for the periods indicated:
Three months ended
March 31,
(Amounts in millions)
20232022
Beginning balance$248,262 $226,514 
NIW13,154 18,823 
Cancellations, principal repayments and other reductions (1)
(8,900)(13,484)
Ending balance$252,516 $231,853 
______________
(1)Includes the estimated amortization of unpaid principal balance of covered loans.
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The following table sets forth primary IIF by LTV ratio at origination as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
95.01% and above$40,776 16 %$39,509 16 %$36,867 16 %
90.01% to 95.00%105,336 42 103,618 42 96,419 42 
85.01% to 90.00%73,756 29 72,132 29 66,226 28 
85.00% and below32,648 13 33,003 13 32,341 14 
Total$252,516 100 %$248,262 100 %$231,853 100 %
The following table sets forth primary RIF by LTV ratio at origination as of the dates indicated:
(Amounts in millions)March 31, 2023December 31, 2022March 31, 2022
95.01% and above$11,545 18 %$11,136 18 %$10,379 18 %
90.01% to 95.00%30,589 48 30,079 48 27,987 48 
85.01% to 90.00%18,054 28 17,621 28 16,082 27 
85.00% and below3,918 3,955 3,847 
Total$64,106 100 %$62,791 100 %$58,295 100 %
The following table sets forth primary IIF by FICO score at origination as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
Over 760$104,635 42 %$102,467 41 %$93,222 40 %
740-75940,983 16 40,097 16 36,821 16 
720-73935,554 14 34,916 14 32,363 14 
700-71929,160 12 28,867 12 27,620 12 
680-69921,717 21,554 21,259 
660-679 (1)
11,057 10,926 10,805 
640-6596,114 6,095 6,188 
620-6392,604 2,630 2,774 
<620692 — 710 — 801 — 
Total$252,516 100 %$248,262 100 %$231,853 100 %
______________
(1)Loans with unknown FICO scores are included in the 660-679 category.
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The following table sets forth primary RIF by FICO score at origination as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
Over 760$26,480 41 %$25,807 41 %$23,326 40 %
740-75910,418 16 10,154 16 9,267 16 
720-7399,126 14 8,931 14 8,224 14 
700-7197,406 12 7,317 12 6,974 12 
680-6995,481 5,428 5,334 
660-679 (1)
2,809 2,767 2,715 
640-6591,549 1,540 1,550 
620-639660 665 699 
<620177 — 182 — 206 — 
Total$64,106 100 %$62,791 100 %$58,295 100 %
______________
(1)Loans with unknown FICO scores are included in the 660-679 category.
The following table sets forth primary IIF by DTI score at origination as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
45.01% and above$46,049 18 %$43,831 18 %$36,428 16 %
38.01% to 45.00%89,768 36 87,816 35 80,741 35 
38.00% and below116,699 46 116,615 47 114,684 49 
Total$252,516 100 %$248,262 100 %$231,853 100 %
The following table sets forth primary RIF by DTI score at origination as of the dates indicated:
(Amounts in millions)
March 31, 2023December 31, 2022March 31, 2022
45.01% and above$11,782 18 %$11,176 18 %$9,227 16 %
38.01% to 45.00%22,830 36 22,268 35 20,392 35 
38.00% and below29,494 46 29,347 47 28,676 49 
Total$64,106 100 %$62,791 100 %$58,295 100 %

Delinquent loans and claims
Our delinquency management process begins with notification by the loan servicer of a delinquency on an insured loan. “Delinquency” is defined in our master policies as the borrower’s failure to pay when due an amount equal to the scheduled monthly mortgage payment under the terms of the mortgage. Generally, the master policies require an insured to notify us of a delinquency if the borrower fails to make two consecutive monthly mortgage payments prior to the due date of the next mortgage payment. We generally consider a loan to be delinquent and establish required reserves after the insured notifies us that the borrower has failed to make two scheduled mortgage payments. Borrowers may cure delinquencies by making all of the delinquent loan payments, agreeing to a loan modification, or by selling the property in full satisfaction of all amounts due under the mortgage. In most cases, delinquencies that are not cured result in a claim under our policy.
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The following table sets forth a roll forward of the number of primary loans in default for the periods indicated:
Three months ended
March 31,
(Loan count)
20232022
Number of delinquencies, beginning of period19,943 24,820 
New defaults9,599 8,724 
Cures(10,771)(10,860)
Claims paid(126)(107)
Rescissions and claim denials(12)(6)
Number of delinquencies, end of period18,633 22,571 
The following table sets forth changes in our direct primary case loss reserves for the periods indicated:
Three months ended
March 31,
(Amounts in thousands) (1)
20232022
Loss reserves, beginning of period$479,343 $606,102 
Claims paid(6,653)(5,617)
Change in reserve(10,403)(9,977)
Loss reserves, end of period$462,287 $590,508 
______________
(1)Direct primary case reserves exclude LAE, IBNR and reinsurance reserves.
The following tables set forth primary delinquencies, direct case reserves and RIF by aged missed payment status as of the dates indicated:
 March 31, 2023
(Dollar amounts in millions)
Delinquencies
Direct primary case
reserves (1)
Risk
in-force
Reserves as % of risk in-force
Payments in default:   
3 payments or less7,876 $67 $462 14 %
4 - 11 payments6,714 182 423 43 %
12 payments or more4,043 213 220 97 %
Total18,633 $462 $1,105 42 %
December 31, 2022
(Dollar amounts in millions)
Delinquencies
Direct primary case
reserves (1)
Risk
in-force
Reserves as % of risk in-force
Payments in default:   
3 payments or less8,920 $69 $509 14 %
4 - 11 payments6,466 166 390 43 %
12 payments or more4,557 244 248 98 %
Total19,943 $479 $1,147 42 %
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 March 31, 2022
(Dollar amounts in millions)
Delinquencies
Direct primary case
reserves (1)
Risk
in-force
Reserves as % of risk in-force
Payments in default:    
3 payments or less6,837 $38 $359 11 %
4 - 11 payments6,875 115 392 29 %
12 payments or more8,859 438 515 85 %
Total22,571 $591 $1,266 47 %
______________
(1)Direct primary case reserves exclude LAE, incurred but not reported and reinsurance reserves.
Reserves as a percentage of RIF as of March 31, 2023 remained flat compared to December 31, 2022 and decreased from March 31, 2022. While the number of loans that are delinquent for 12 months or more has decreased, it remains elevated compared to pre-COVID-19 levels due, in large part, to COVID-19 related forbearance options and the slowing of foreclosures. Due to continued forbearance options, foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process there is still uncertainty around the likelihood and timing of delinquencies going to claim.
Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns. Delinquency rates are shown by region based upon the location of the underlying property, rather than the location of the lender.
The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of March 31, 2023:
 
Percent of RIF
Percent of direct
primary case
reserves
Delinquency
rate
By State:  
California12 %11 %1.99 %
Texas1.92 %
Florida (1)
2.24 %
New York (1)
13 2.82 %
Illinois (1)
2.51 %
Arizona1.68 %
Michigan1.72 %
North Carolina
1.48 %
Georgia2.19 %
Washington1.64 %
All other states (2)
45 42 1.79 %
Total100 %100 %1.93 %
______________
(1)Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed.
(2)Includes the District of Columbia.
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The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2022:
 
Percent of RIF
Percent of direct
primary case
reserves
Delinquency
rate
By State:   
California12 %10 %2.09 %
Texas2.12 %
Florida (1)
2.54 %
New York (1)
13 2.95 %
Illinois (1)
2.54 %
Arizona1.78 %
Michigan1.79 %
North Carolina
1.59 %
Georgia2.23 %
Washington
1.92 %
All other states (2)
45 42 1.94 %
Total100 %100 %2.08 %
______________
(1)Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed.
(2)Includes the District of Columbia.
The table below sets forth our primary delinquency rates for the ten largest Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by our primary RIF as of March 31, 2023:
Percent of RIF
Percent of direct primary case reserves
Delinquency
rate
By MSA or MD:
Phoenix, AZ MSA%%1.72 %
Chicago-Naperville, IL MD2.77 %
Atlanta, GA MSA2.35 %
New York, NY MD3.51 %
Washington-Arlington, DC MD1.79 %
Houston, TX MSA2.40 %
Riverside-San Bernardino, CA MSA2.54 %
Los Angeles-Long Beach, CA MD2.24 %
Dallas, TX MD1.65 %
Denver-Aurora-Lakewood, CO MSA0.93 %
All Other MSAs/MDs77 71 1.85 %
Total100 %100 %1.93 %
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The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2022:
 
Percent of RIF
Percent of direct primary case reserves
Delinquency
rate
By MSA or MD:   
Chicago-Naperville, IL MD%%2.84 %
Phoenix, AZ MSA1.83 %
New York, NY MD3.75 %
Atlanta, GA MSA2.42 %
Washington-Arlington, DC MD1.85 %
Houston, TX MSA2.60 %
Riverside-San Bernardino, CA MSA2.89 %
Los Angeles-Long Beach, CA MD2.18 %
Dallas, TX MD1.86 %
Denver-Aurora-Lakewood, CO MSA1.12 %
All Other MSAs/MDs77 71 2.00 %
Total100 %100 %2.08 %
The frequency of delinquencies may not correlate directly with the number of claims received because delinquencies may cure. The rate at which delinquencies cure is influenced by borrowers’ financial resources and circumstances and regional economic differences. Whether a delinquency leads to a claim correlates highly with the borrower’s equity at the time of delinquency, as it influences the borrower’s willingness to continue to make payments, the borrower’s or the insured’s ability to sell the home for an amount sufficient to satisfy all amounts due under the mortgage loan and the borrower’s financial ability to continue making payments. When we receive notice of a delinquency, we use our proprietary model to determine whether a delinquent loan is a candidate for a modification. When our model identifies such a candidate, our loan workout specialists prioritize cases for loss mitigation based upon the likelihood that the loan will result in a claim. Loss mitigation actions include loan modification, extension of credit to bring a loan current, foreclosure forbearance, pre-foreclosure sale and deed-in-lieu. These loss mitigation efforts often are an effective way to reduce our claim exposure and ultimate payouts.
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The following table sets forth the dispersion of primary RIF and direct primary case reserves by policy year and delinquency rates as of March 31, 2023:
 
Percent
of RIF
Percent of direct
primary case
reserves
Delinquency
rate
Cumulative
delinquency
rate (1)
Policy Year:    
2008 and prior%25 %8.81 %5.56 %
2009 to 20154.03 %0.67 %
20163.01 %0.73 %
20173.53 %0.93 %
20184.08 %1.02 %
201910 2.57 %0.86 %
202021 16 1.42 %0.85 %
202131 18 1.23 %1.06 %
202224 0.74 %0.71 %
2023— 0.02 %0.02 %
Total portfolio100 %100 %1.93 %4.22 %
______________
(1)Calculated as the sum of the number of policies where claims were ever paid to date and number of policies for loans currently in default divided by policies ever in-force.
The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2022:
 
Percent
of RIF
Percent of direct
primary case
reserves
Delinquency
rate
Cumulative
delinquency
rate (1)
Policy Year:    
2008 and prior%26 %9.61 %5.57 %
2009 to 20145.01 %0.69 %
20153.61 %0.71 %
20163.17 %0.81 %
20173.78 %1.01 %
20184.63 %1.18 %
201911 2.71 %0.93 %
202022 17 1.47 %0.92 %
202132 14 1.20 %1.06 %
202225 0.54 %0.52 %
Total portfolio100 %100 %2.08 %4.26 %
______________
(1)Calculated as the sum of the number of policies where claims were ever paid to date and number of policies for loans currently in default divided by policies ever in-force.
Loss reserves in policy years in 2008 and prior are outsized compared to their representation of RIF. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in these policy years. Although uncertainty remains with respect to the ultimate losses we will experience on these policy years, they have become a smaller percentage of our total mortgage insurance portfolio. Loss reserves has shifted to newer book years, largely 2020 and later, given their
48


significant representation of RIF. As of March 31, 2023, our 2016 and newer policy years represented approximately 95% of our primary RIF and 68% of our total direct primary case reserves.
Investment Portfolio
Our investment portfolio is affected by factors described below, each of which in turn may be affected by current macroeconomic conditions as noted above in “—Trends and Conditions.” The investment portfolios of our insurance subsidiaries are directed by the Enact Investment Committee, a management level-committee, with Genworth serving as the investment manager. The investment portfolio of EHI is directed by a separate management-level EHI Investment Committee with a third-party investment manager. These parties, with oversight from our Board of Directors and our senior management team, are responsible for the execution of our investment strategy. Our investment portfolio is an important component of our consolidated financial results and represents our primary source of claims paying resources. Our investment portfolio primarily consists of a diverse mix of highly rated fixed income securities and is designed to achieve the following objectives:
Meet policyholder obligations through maintenance of sufficient liquidity;
Preserve capital;
Generate investment income;
Maximize statutory capital; and
Increase shareholder value, among other objectives.
To achieve our portfolio objectives, our investment strategy focuses primarily on:
Our business outlook, including current and expected future investment conditions;
Investment selection based on fundamental, research-driven strategies;
Diversification across a mix of fixed income, low-volatility investments while actively pursuing strategies to enhance yield;
Regular evaluation and optimization of our asset class mix;
Continuous monitoring of investment quality, duration, and liquidity;
Regulatory capital requirements; and
Restriction of investments correlated to the residential mortgage market.
49


Fixed Maturity Securities Available-for-Sale
The following table presents the fair value of our fixed maturity securities available-for-sale as of the dates indicated:
 March 31, 2023December 31, 2022
(Amounts in thousands)
Fair value
% of
total
Fair value
% of
total
U.S. government, agencies and GSEs$42,709 %$44,769 %
State and political subdivisions431,778 419,856 
Non-U.S. government9,493 — 9,349 — 
U.S. corporate2,679,485 54 2,646,863 54 
Non-U.S. corporate630,502 13 652,844 13 
Residential mortgage-backed10,344 — 11,043 — 
Other asset-backed1,125,316 23 1,100,036 23 
Total available-for-sale fixed maturity securities
$4,929,627 100 %$4,884,760 100 %
Our investment portfolio did not include any direct residential real estate or whole mortgage loans as of March 31, 2023 or December 31, 2022. We have no derivative financial instruments in our investment portfolio.
As of both March 31, 2023 and December 31, 2022, 98% of our investment portfolio was rated investment grade. The following table presents the security ratings of our fixed maturity securities as of the dates indicated:
 March 31, 2023December 31, 2022
AAA10 %10 %
AA16 16 
A34 34 
BBB38 38 
BB & below
Total
100 %100 %
The table below presents the effective duration and investment yield on our investments available-for-sale, excluding cash and cash equivalents as of the dates indicated:
 March 31, 2023December 31, 2022
Duration (in years)3.63.6
Pre-tax yield (% of average investment portfolio assets)3.2 %3.1 %
We manage credit risk by analyzing issuers, transaction structures and any associated collateral. We also manage credit risk through country, industry, sector and issuer diversification and prudent asset allocation practices.
We primarily mitigate interest rate risk by employing a buy and hold investment philosophy that seeks to match fixed income maturities with expected liability cash flows in modestly adverse economic scenarios.
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Liquidity and Capital Resources
Cash Flows
The following table summarizes our consolidated cash flows for the periods indicated:
Three months ended
March 31,
(Amounts in thousands)
20232022
Net cash provided by (used in): 
Operating activities$119,339 $160,829 
Investing activities33,463 (146,497)
Financing activities(44,956)— 
Net increase in cash and cash equivalents$107,846 $14,332 
Our most significant source of operating cash flows is from premiums received from our insurance policies, while our most significant uses of operating cash flows are generally for claims paid on our insured policies and our operating expenses. Net cash from operating activities decreased largely due the timing of tax payments and lower unearned premium declines from cancelled single premium policies. Cash flows from operations were also impacted by changes in reserves and stock-based compensation expense.
Investing activities are primarily related to purchases, sales and maturities of our investment portfolio. Net cash provided by investing activities increased as a result of maturities and sales of securities outpacing purchases of fixed maturity securities in the current year.
During the three months ended March 31, 2023, our cash flows from financing activities included dividends paid of $22.8 million and share repurchases of $22.2 million. The amount and timing of future dividends is discussed within “—Trends and Conditions” as well as below. There were no dividends paid or other financing activity during the three months ended March 31, 2022.
Capital Resources and Financing Activities
We issued our 2025 Senior Notes in 2020 with interest payable semi-annually in arrears on February 15 and August 15 of each year. The 2025 Senior Notes mature on August 15, 2025. We may redeem the 2025 Senior Notes, in whole or in part, at any time prior to February 15, 2025, at our option, by paying a make-whole premium, plus accrued and unpaid interest, if any. At any time on or after February 15, 2025, we may redeem the 2025 Senior Notes, in whole or in part, at our option, at 100% of the principal amount, plus accrued and unpaid interest. The 2025 Senior Notes contain customary events of default, which subject to certain notice and cure conditions, can result in the acceleration of the principal and accrued interest on the outstanding 2025 Senior Notes if we breach the terms of the indenture.
On June 30, 2022, we entered into a credit agreement with a syndicate of lenders that provides for a five-year, unsecured revolving credit facility (the “Facility”) in the initial aggregate principal amount of $200 million. We may use borrowings under the Facility for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries. The Facility contains several covenants, including financial covenants relating to minimum net worth, capital and liquidity levels, maximum debt to capitalization level and PMIERs compliance. We are in compliance with all covenants of the Facility and the Facility remained undrawn as of March 31, 2023.
Restrictions on the Payment of Dividends
The ability of our regulated insurance operating subsidiaries to pay dividends and distributions to us is restricted by certain provisions of North Carolina insurance laws. Our insurance subsidiaries may pay
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dividends only from unassigned surplus; payments made from sources other than unassigned surplus, such as paid-in and contributed surplus, are categorized as distributions. Notice of all dividends must be submitted to the Commissioner of the NCDOI (the “Commissioner”) within 5 business days after declaration of the dividend or distribution, and at least 30 days before payment thereof. No dividend may be paid until 30 days after the Commissioner has received notice of the declaration thereof and (i) has not within that period disapproved the payment or (ii) has approved the payment within the 30-day period. Any distribution, regardless of amount, requires that same 30-day notice to the Commissioner, but also requires the Commissioner’s affirmative approval before being paid. Based on our estimated statutory results and in accordance with applicable dividend restrictions, our insurance subsidiaries have the capacity to pay dividends from unassigned surplus of $264 million as of March 31, 2023, with 30-day advance notice to the Commissioner of the intent to pay. In addition to dividends and distributions, alternative mechanisms, such as share repurchases, subject to any requisite regulatory approvals, may be utilized from time to time to upstream surplus.
In addition, we review multiple other considerations in parallel to determine a prospective dividend strategy for our regulated insurance operating subsidiaries. Given the regulatory focus on the reasonableness of an insurer’s surplus in relation to its outstanding liabilities and the adequacy of its surplus relative to its financial needs for any dividend, our insurance subsidiaries consider the minimum amount of policyholder surplus after giving effect to any contemplated future dividends. Regulatory minimum policyholder surplus is not codified in North Carolina law and limitations may vary based on prevailing business conditions including, but not limited to, the prevailing and future macroeconomic conditions. We estimate regulators would require a minimum policyholder surplus of approximately $300 million to meet their threshold standard. Given (i) we are subject to statutory accounting requirements that establish a contingency reserve of at least 50% of net earned premiums annually for ten years, after which time it is released into policyholder surplus and (ii) that no material 10-year contingency reserve releases are scheduled before 2024, we expect modest growth in policyholder surplus through 2024. As a result, minimum policyholder surplus could be a limitation on the future dividends of our regulated operating subsidiaries.
Another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs. Prior to the satisfaction of the GSE Conditions, the GSE Restrictions required EMICO to maintain 120% of PMIERs Minimum Required Assets through 2022. In addition, under PMIERs, EMICO is subject to other operational and financial requirements that approved insurers must meet in order to remain eligible to insure loans purchased by the GSEs. Refer to “—Trends and Conditions” for recent updates related to these requirements.
Our regulated insurance operating subsidiaries are also subject to statutory “risk-to-capital” (“RTC”) requirements that affect the dividend strategies of our regulated operating subsidiaries. EMICO’s domiciliary regulator, the NCDOI, requires the maintenance of a statutory RTC ratio not to exceed 25:1. See “—Risk-to-Capital Ratio” for additional RTC trend analysis.
We consider potential future dividends compared to the prior year statutory net income in the evaluation of dividend strategies for our regulated operating subsidiaries. We also consider the dividend payout ratio, or the ratio of potential future dividends compared to the estimated U.S. GAAP net income, in the evaluation of our dividend strategies. In either case, we do not have prescribed target or maximum thresholds, but we do evaluate the reasonableness of a potential dividend relative to the actual or estimated income generated in the proceeding or preceding calendar year after giving consideration to prevailing business conditions including, but not limited to the prevailing and future macroeconomic conditions. In addition, the dividend strategies of our regulated operating subsidiaries are made in consultation with our Parent.
In April 2023, EMICO completed a distribution of approximately $158 million that will primarily be used to support our ability to return capital to shareholders and bolster financial flexibility. We intend to continue to use future EMICO distributions for these purposes.
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The credit agreement entered into in connection with the Facility contains customary restrictions on EHI’s ability to pay cash dividends. Under the credit agreement, EHI is permitted to make cash distributions (1) so long as no Default or Event of Default (as each are defined in the credit agreement) has occurred and is continuing and EHI is in pro forma compliance with its financial covenants as described below, at the time of and after giving effect to such payment, (2) within 60 days of declaration of any cash dividend so long as the payment was permitted under the credit agreement at the time of such declaration and (3) other customary exceptions as more fully set forth in the credit agreement.
The credit agreement requires EHI to maintain the following financial covenants: a minimum consolidated net worth equal to the sum of (i) 72.5% of EHI’s consolidated net worth as of June 30, 2022 (“the Closing Date”), (ii) 50% of EHI’s positive consolidated net income for each fiscal quarter after the Closing Date and (iii) 50% of any increase in EHI’s consolidated net worth after the Closing Date resulting from equity issuances or capital contributions; in respect of EMICO, a minimum total adjusted capital amount equal to 72.5% of EMICO’s total adjusted capital as of the Closing Date; a maximum debt-to-total capitalization ratio of 0.35 to 1.00; a minimum liquidity level of $25,000,000; and compliance with all applicable financial requirements under the Private Mortgage Insurer Eligibility Requirements published by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. For purposes of determining EHI’s compliance with the foregoing financial covenants, the consolidated net worth metric, total adjusted capital metric, debt-to-capitalization ratio and liquidity metric (including, in each case, any component thereof) are each calculated as set forth in the credit agreement.
In addition to the restrictions described above, all dividends from EHI are subject to Parent consent and EHI Board of Directors approval.
Risk-to-Capital Ratio
We compute our RTC ratio on a separate company statutory basis, as well as for our combined insurance operations. The RTC ratio is net RIF divided by policyholders’ surplus plus statutory contingency reserve. Our net RIF represents RIF, net of reinsurance ceded, and excludes risk on policies that are currently delinquent and for which loss reserves have been established. Statutory capital consists primarily of statutory policyholders’ surplus (which increases as a result of statutory net income and decreases as a result of statutory net loss and dividends paid), plus the statutory contingency reserve. The statutory contingency reserve is reported as a liability on the statutory balance sheet.
Certain states have insurance laws or regulations that require a mortgage insurer to maintain a minimum amount of statutory capital (including the statutory contingency reserve) relative to its level of RIF in order for the mortgage insurer to continue to write new business. While formulations of minimum capital vary in certain states, the most common measure applied allows for a maximum permitted RTC ratio of 25:1.
The following table presents the calculation of our RTC ratio for our combined insurance subsidiaries as of the dates indicated:
(Dollar amounts in millions)March 31, 2023December 31, 2022
Statutory policyholders’ surplus$1,193 $1,136 
Contingency reserves3,679 3,551 
Combined statutory capital $4,872 $4,687 
Adjusted RIF(1)
$61,546 $60,061 
Combined risk-to-capital ratio12.612.8
______________
(1)Adjusted RIF for purposes of calculating combined statutory RTC differs from RIF presented elsewhere herein. In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies.
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The following table presents the calculation of our RTC ratio for our principal insurance company, EMICO, as of the dates indicated:
(Dollar amounts in millions)March 31, 2023December 31, 2022
Statutory policyholders’ surplus$1,141 $1,084 
Contingency reserves3,675 3,548 
EMICO statutory capital $4,816 $4,632 
Adjusted RIF(1)
$61,123 $59,663 
EMICO risk-to-capital ratio12.7 12.9
______________
(1)Adjusted RIF for purposes of calculating EMICO statutory RTC differs from RIF presented elsewhere herein. In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies.
Liquidity
As of March 31, 2023, we maintained liquidity in the form of cash and cash equivalents of $622 million compared to $514 million as of December 31, 2022, and we also held significant levels of investment-grade fixed maturity securities and short-term investments that can be monetized should our cash and cash equivalents be insufficient to meet our obligations.
Additionally, on June 30, 2022, we entered into a five-year, unsecured revolving credit facility with a syndicate of lenders in the initial aggregate principal amount of $200 million. The Facility may be used for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries. The Facility remains undrawn as of March 31, 2023.
The principal sources of liquidity in our business currently include insurance premiums, net investment income and cash flows from investment sales and maturities. We believe that the operating cash flows generated by our mortgage insurance subsidiary will provide the funds necessary to satisfy our claim payments, operating expenses and taxes in both the short term and long term. However, our subsidiaries are subject to regulatory and other capital restrictions with respect to the payment of dividends. We currently have no material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than the 2025 Senior Notes and the Facility.
Financial Strength Ratings
The following EMICO financial strength ratings have been independently assigned by third-party rating organizations and represent our current ratings, which are subject to change.
Name of AgencyRatingOutlookActionDate of Rating
Moody’s Investor Service, Inc.A3StableUpgradeMarch 1, 2023
Fitch Ratings, Inc.A-StableUpgradeApril 25, 2023
S&P Global RatingsBBB+StableUpgradeFebruary 16, 2023
Contractual Obligations and Commitments
Our loss reserves have a high degree of estimation due to macroeconomic uncertainty along with delinquencies from borrower forbearance programs and foreclosure delays as a result COVID-19. Therefore, it is possible we could have higher contractual obligations related to these loss reserves if they do not cure or progress to claim as we expect. Other than changes in our aforementioned loss reserves, there have been no material additions or changes to our contractual obligations or other off-balance sheet arrangements as compared to the amounts disclosed within our audited consolidated financial statements for the years ended December 31, 2022 and 2021.
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Critical Accounting Estimates
As of the filing date of this report, there were no significant changes in our critical accounting estimates from those discussed in our Annual Report.
New Accounting Standards
Refer to Note 2 in our unaudited condensed consolidated financial statements for the three months ended March 31, 2023 and 2022, and in our audited consolidated financial statements for the years ended December 31, 2022 and 2021, for a discussion of recently adopted and not yet adopted accounting standards.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We own and manage a large investment portfolio of various holdings, types and maturities. Investment income is one of our material sources of revenue and the investment portfolio represents the primary resource supporting operational and claim payments. The assets within the investment portfolio are exposed to the same factors that affect overall financial market performance. While our investment portfolio is exposed to factors affecting markets worldwide, it is most sensitive to fluctuations in the drivers of United States markets.
We manage market risk via our defined investment policy guidelines implemented by our investment managers with oversight from our Board of Directors and our senior management. Important drivers of our market risk exposure that we monitor and manage include but are not limited to:
Changes to the level of interest rates. Increasing interest rates may reduce the value of certain fixed-rate bonds held in the investment portfolio. Higher rates may cause variable-rate assets to generate additional income. Decreasing rates will have the reverse impact. Significant changes in interest rates can also affect persistency and claim rates that may require that the investment portfolio be restructured to better align it with future liabilities and claim payments. Such restructuring may cause investments to be liquidated when market conditions are adverse.
Changes to the term structure of interest rates. Rising or falling rates typically change by different amounts along the yield curve. These changes may have unforeseen impacts on the value of certain assets.
Market volatility/changes in the real or perceived credit quality of investments. Deterioration in the quality of investments, identified through changes to our own or third-party (e.g., rating agency) assessments, will reduce the value and potentially the liquidity of investments.
Concentration risk. If the investment portfolio is highly concentrated in one asset, or in multiple assets whose values are highly correlated, the value of the total portfolio may be greatly affected by the change in value of just one asset or a group of highly correlated assets.
Prepayment risk. Bonds may have call provisions that permit debtors to repay prior to maturity when it is to their advantage. This typically occurs when rates fall below the interest rate of the debt.
Market risk is measured for all investment assets at the individual security level. Market risks that are not fully captured by the quantitative analysis and material market risk changes that occur from the last reporting period to the current are discussed within “—Trends and conditions” and “—Investment Portfolio” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
At March 31, 2023, the effective duration of our investments available-for-sale was 3.6 years, which means that an instantaneous parallel shift (movement up or down) in the yield curve of 100 basis points would result in a change of 3.6% in fair value of our investments available-for-sale.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31, 2023, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023.
Changes in Internal Control Over Financial Reporting During the Quarter Ended March 31, 2023
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
We are not subject to any pending material legal proceedings.
Item 1A. Risk Factors
We have disclosed within Part I, Item 1A in our Annual Report the risk factors that could have a material adverse effect on our business, results of operations and/or financial condition. There have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Annual Report and the other information set forth elsewhere in this Form 10-Q. These risk factors and other information may not describe every risk that we face. The occurrence of any additional risks and uncertainties that are currently immaterial or unknown could have a material adverse effect on our business, results of operations and/or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The table below sets forth information regarding repurchases of our common shares during the three months ended March 31, 2023:
Period
(Dollar amounts in thousands except per share amounts)
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet be Purchased under Plans or Programs (1)
January 1 - January 31, 2023253,689$24.13 253,689$67,347 
February 1 - February 28, 2023440,339$24.35 440,339$56,627 
March 1 - March 31, 2023222,748$23.94 222,748$51,294 
Total916,776$24.19 916,776$51,294 
(1) On November 1, 2022 the Company announced authorization to repurchase up to $75 million of its common shares. The authorization has no expiration date.
Subsequent to quarter end, the Company purchased 353,416 shares at an average price of $23.73 through April 30, 2023.
Item 5. Other Information
The following disclosure is being made on a voluntary basis and not pursuant to any specific requirement under Form 10‑Q, Form 8‑K or otherwise. The Master Agreement dated September 15, 2021 between Genworth Financial, Inc. and Enact Holdings, Inc. (as subsequently amended, the “Master Agreement”), was amended and restated on March 20, 2023. The Master Agreement was revised to remove Genworth’s approval of EHI’s annual operating plan clause as previously provided for by Section 5.7-(d) of the Master Agreement.
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Item 6. Exhibits and Financial Statement Schedules
Exhibit
Number
Description of Exhibit
10.1
10.2*
10.3
10.4
10.5
10.6
31.1*
31.2*
32.1**
32.2**
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
______________
+    Indicates management contract and compensatory plan
*    Filed herewith
**    Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended

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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

ENACT HOLDINGS, INC.
(Registrant)
Dated: May 5, 2023
By:
/s/ Hardin Dean Mitchell
Hardin Dean Mitchell
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
By:
/s/ James McMullen
James McMullen
Vice President, Controller and Principal Accounting Officer

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