Enact Holdings, Inc. (NASDAQ:ACT) Q2 2023 Earnings Call Transcript

Operator: Your next question comes from the line of Geoffrey Dunn with Dowling Partners. Your line is now open.

Geoffrey Dunn: Hi. Thank you. Good morning. It looks like we just got some static.

Rohit Gupta: Hey, Geoff.

Geoffrey Dunn: Given your commentary on pricing and the implication that if we’re in a soft landing or normalized, it sounds like you might think pricing comes down. I’m curious if you think industry pricing was adequate for the environment a year ago. And so as we think about things going forward, if we are going into something that’s more normal, do we go back to where we were a year ago, or do we only give part of that back, because maybe the industry was, on average, cheating a little too much for normalized credit?

Rohit Gupta: Good morning, Geoff and thank you for the question. So, let me kind of answer your question in two ways. First thing, a year ago, when we were writing new business, we did say that we found that business to be attractive in terms of returns. And we believe that we were writing that business above our cost of capital. I think at that point of time, our view of macroeconomic environment was different than today’s macroeconomic environment. And let me just separate it into two broad buckets. First thing would be just risk-free rates. Our risk-free rates were a lot lower. And I’ll just point you to early 2022. And then second thing would be our expectations in terms of unemployment, home prices and just the uncertainty in the environment.

So at that point of time, using those assumptions, we were writing business at good returns. Now, as it turns out, conditions change a lot in the last 18 months or so. I think, looking forward, you have a very fair question that if we are in an environment, where we do end up with a soft landing. but at the same time, market rates, risk free rates are still higher. I would expect that we would retain some of the price increases or most of the price increases, because our cost of capital would have moved up. So, even if the economic expectations are coming back to normal, I could see scenarios in which our pricing actually sustains at a higher level. And that’s how we think about it. Obviously, every MI company needs to think of their own frameworks, but we could see that pricing being sustained at a higher level.

Geoffrey Dunn: That’s helpful. Thank you.

Rohit Gupta: You’re welcome.

Operator: And we have no further questions at this time. I will now turn the call back over to Rohit Gupta.

Rohit Gupta: Thank you, Bella. Thank you, everyone. We appreciate your interest in Enact and I look forward to seeing some of you in New York at the Barclays Global Financial Services Conference in September. Thank you, all. We’ll wrap up the call here.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.