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Enact Holdings, Inc.

Enact Holdings, Inc.ACTEarnings & Financial Report

Nasdaq · Financials · Insurance Agents, Brokers & Service

Enact Holdings, Inc. is a leading U.S.-based private mortgage insurance provider. It delivers risk mitigation solutions to residential mortgage lenders, banks, and credit unions, enabling borrowers with smaller down payments to access affordable home financing, and supports sustainable homeownership for diverse consumer groups across the United States.

What changed in Enact Holdings, Inc.'s 10-K — 2022 vs 2023

Top changes in Enact Holdings, Inc.'s 2023 10-K

560 paragraphs added · 709 removed · 480 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

123 edited+30 added−78 removed191 unchanged
In normal market 13 conditions, we believe our CRT program also enhances our return profile. Given the volatility protection and capital relief at attractive terms, CRT enables us to employ an “acquire, manage and distribute” strategy.
In normal market conditions, we believe our CRT program also enhances our return profile. Given the volatility protection 13 and capital relief at attractive terms, CRT enables us to employ an “acquire, manage and distribute” strategy.
We are regularly upgrading and enhancing our systems and technology, with an eye towards expanding our capabilities, improving productivity and enhancing our customer experience, including: • Policy administration, billing, delinquency and claims processes and systems; • Enhancing the speed and efficiency of our pricing and auto-decisioning capabilities; • Ensuring optimal integration capabilities to our customers’ loan origination and mortgage insurance ordering and rate quoting processes; and 16 • Artificial intelligence and machine learning in the areas of risk and portfolio management.
We are regularly upgrading and enhancing our systems and technology, with an eye towards expanding our capabilities, improving productivity and enhancing our customer experience, including: • Policy administration, billing, delinquency and claims processes and systems; • Enhancing the speed and efficiency of our pricing and auto-decisioning capabilities; • Ensuring optimal integration capabilities to our customers’ loan origination and mortgage insurance ordering and rate quoting processes; and • Artificial intelligence and machine learning in the areas of risk and portfolio management.
Dodd-Frank Act Although the federal government generally does not directly regulate the insurance business, federal initiatives often have an impact on our business in a variety of ways. From time to time, federal measures 23 are proposed that may significantly affect the insurance business. These areas include financial services regulation, securities regulation, derivatives regulation, money laundering, privacy regulation and taxation.
Dodd-Frank Act Although the federal government generally does not directly regulate the insurance business, federal initiatives often have an impact on our business in a variety of ways. From time to time, federal measures are proposed that may significantly affect the insurance business. These areas include financial services regulation, securities regulation, derivatives regulation, money laundering, privacy regulation and taxation.
We routinely assess talent, engage in deep succession planning at all levels of the organization and provide feedback to our employees through a performance review process. • Our employee-led Diversity & Inclusion Council helps to build an inclusive culture through company-wide events, participation in our recruitment efforts and by educating our employees on the experiences and perspectives of others.
We routinely assess talent, engage in deep succession planning at all levels of the organization and provide feedback to our employees through a performance review process. • Our employee-led Diversity, Equity & Inclusion Council helps to build an inclusive culture through company-wide events, participation in our recruitment efforts and by educating our employees on the experiences and perspectives of others.
By providing customers an easy way to quote and order our mortgage 10 insurance products, either through our award-winning ordering and rate quote website or directly within customers’ systems, we believe we make the transaction easy, allowing us to drive repeat volume. Risk Management and Oversight Strong risk management is a critical part of our business.
By providing customers an easy way to quote and order our mortgage insurance products, either through our award-winning ordering and rate quote website or directly within customers’ systems, we believe we make the transaction easy, allowing us to drive repeat volume. Risk Management and Oversight Strong risk management is a critical part of our business.
All fifty states also require entities to provide notification to affected state residents and, in certain instances, state regulators, such as state attorneys general or state insurance 31 commissions, in the event of certain security breaches affecting personal information, though some of these laws include exemptions for entities regulated by the GLB Act.
All fifty states also require entities to provide notification to affected state residents and, in certain instances, state regulators, such as state attorneys general or state insurance commissions, in the event of certain security breaches affecting personal information, though some of these laws include exemptions for entities regulated by the GLB Act.
Finally, most jurisdictions have adopted insurance laws or regulations setting forth detailed requirements for cost sharing and management agreements between an insurer and its affiliates. 20 State insurance laws and regulations require that a person obtain the approval of the insurance commissioner of an insurer’s domiciliary jurisdiction prior to acquiring control of such insurer.
Finally, most jurisdictions have adopted insurance laws or regulations setting forth detailed requirements for cost sharing and management agreements between an insurer and its affiliates. State insurance laws and regulations require that a person obtain the approval of the insurance commissioner of an insurer’s domiciliary jurisdiction prior to acquiring control of such insurer.
Any delays in foreclosure, including foreclosure moratoriums imposed by state and local governments and the GSEs, such as those due to COVID-19, could cause our losses to increase as expenses accrue for longer periods or if the value of foreclosed homes further decline during such foreclosure delays.
Any delays in foreclosure, including foreclosure moratoriums imposed by state and local governments and the GSEs, such as those due to COVID-19, could cause our losses to increase as expenses accrue for longer periods or if the value of foreclosed homes decline during such foreclosure delays.
We deem a reduction in the claim amount paid relative to the amount requested in the claim notice to be a curtailment. When reviewing loan and servicing files in connection with the delinquency or claims process, we may also decide to rescind coverage of the underlying mortgages or deny payment of claims.
We deem a reduction in the claim amount paid relative to the amount requested in the claim notice to be a curtailment. 15 When reviewing loan and servicing files in connection with the delinquency or claims process, we may also decide to rescind coverage of the underlying mortgages or deny payment of claims.
We also periodically receive claim notices that request coverage for costs and expenses associated with items not covered under our policies, such as losses resulting from property damage to a covered home. We actively review claim notices to ensure we 15 pay only for covered expenses.
We also periodically receive claim notices that request coverage for costs and expenses associated with items not covered under our policies, such as losses resulting from property damage to a covered home. We actively review claim notices to ensure we pay only for covered expenses.
To the extent that other government agencies guaranteeing residential mortgage loans may adopt definitions of a QM that are more favorable to lenders and mortgage holders than the CFPB QM Rule, our mortgage insurance business could also be negatively impacted.
To the extent that other 26 government agencies guaranteeing residential mortgage loans may adopt definitions of a QM that are more favorable to lenders and mortgage holders than the CFPB QM Rule, our mortgage insurance business could also be negatively impacted.
GSEs The GSEs are the largest participants in the secondary mortgage market, buying residential mortgages from banks and other primary lenders as part of their government mandate to provide liquidity and stability in the United States housing finance system.
GSEs The GSEs are the largest participants in the secondary mortgage market, buying residential mortgages from banks and other primary lenders as part of their government mandate to provide access, liquidity and stability in the United States housing finance system.
Risk Factors—Risks Relating to Our Business—If we are unable to continue to meet the requirements mandated by PMIERs, the GSE Restrictions and any additional restrictions imposed on us by the GSEs, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of operations and financial condition.” Private Mortgage Insurance Private mortgage insurance plays a critical role in the United States residential mortgage market by facilitating secondary market sales, particularly for Low Down Payment Loans.
Risk Factors—Risks Relating to Our Business—If we are unable to continue to meet the requirements mandated by PMIERs, or any additional restrictions which may be imposed on us by the GSEs, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of operations and financial condition.” Private Mortgage Insurance Private mortgage insurance plays a critical role in the United States residential mortgage market by facilitating secondary market sales, particularly for Low Down Payment Loans.
We believe this framework encompasses all major risks to which we are exposed, including credit risk, market risk, insurance risk, housing risk, operational risk, model risk, IT risk and any other risk that poses a material threat to the viability of the Company.
We believe this framework encompasses all major risks to which we are exposed, including credit risk, market risk, insurance risk, housing risk, operational risk, model risk, IT risk, including cybersecurity risk, and any other risk that poses a material threat to the viability of the Company.
However, approval by the NCDOI is required for contingency reserve releases when loss ratios exceed 35%. The establishment of the statutory contingency reserve is funded by premiums that would otherwise generate net earnings that would be reflected in policyholder surplus.
However, approval by the NCDOI is required for contingency reserve releases when loss ratios exceed 35%. The establishment of the statutory 22 contingency reserve is funded by premiums that would otherwise generate net earnings that would be reflected in policyholder surplus.
The Federal Trade Commission, the DOJ, the New York State Department of Financial Services (“NYDFS”), the SEC and the NAIC have undertaken various studies, reports and actions regarding privacy and data security for entities under their respective supervision.
The Federal Trade Commission, the DOJ, the New York State Department of Financial 27 Services (“NYDFS”), the SEC and the NAIC have undertaken various studies, reports and actions regarding privacy and data security for entities under their respective supervision.
Investment Portfolio 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. Under the terms of our investment management agreement, the Company is charged an investment management fee by our Parent.
Investment Portfolio 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. Under the terms of our investment management agreement, the Company is charged an investment management fee by Genworth.
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 25 applicable risk-based required asset amount factor for a non-performing loan.
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 addition, we have an experienced technology integration team that allows us to quickly customize loan delivery solutions for our customers.
In addition, 10 we have an experienced technology integration team that allows us to quickly customize loan delivery solutions for our customers.
Our insurance subsidiaries are not currently undergoing market conduct reviews in any states. Investments State insurance laws and regulations require diversification of our insurance subsidiaries’ investment portfolio and limit the proportion of, or in some cases totally prohibit, investments our insurance subsidiaries may hold in different asset categories.
Our insurance subsidiaries are not currently undergoing market conduct reviews in any states or other jurisdictions. Investments State insurance laws and regulations require diversification of our insurance subsidiaries’ investment portfolio and limit the proportion of, or in some cases totally prohibit, investments our insurance subsidiaries may hold in different asset categories.
In 2022 and 2021, we settled over half of our claims through the third-party sale or acquisition options due largely to embedded home price appreciation. Claim activity is not evenly spread across the coverage period of loans we insure.
In 2023 and 2022, we settled over half of our claims through the third-party sale or acquisition options due largely to embedded home price appreciation. Claim activity is not evenly spread across the coverage period of loans we insure.
This guidance could reduce claims and 28 mitigate losses but may also contribute to delays in foreclosure and have an adverse impact on resolution of claims with respect to the servicing of mortgage loans covered by our insurance policies. The CARES Act provides financial assistance for businesses and individuals and targeted regulatory relief for financial institutions.
This guidance could reduce claims and mitigate losses but may also contribute to delays in foreclosure and have an adverse impact on resolution of claims with respect to the servicing of mortgage loans covered by our insurance policies. The CARES Act provided financial assistance for businesses and individuals and targeted regulatory relief for financial institutions.
Some states have recently enacted new privacy and information security requirements and new insurance laws that require certain regulated entities to implement and maintain comprehensive information security programs to safeguard the personal information of insureds and enrollees.
Several states have recently enacted new privacy and information security requirements and new insurance laws that require certain regulated entities to implement and maintain comprehensive information security programs to safeguard the personal information of insureds and enrollees.
Federal, State and Local Government Agencies Private mortgage insurers, including us, compete for mortgage insurance business directly with federal government agencies, principally the FHA and the VA, and, to a lesser extent, state and local housing finance agencies.
Federal, State and Local Government Agencies Private mortgage insurers, including the Company, compete for mortgage insurance business directly with federal government agencies, principally the FHA and the VA, and, to a lesser extent, state and local housing finance agencies.
These laws and regulations are regularly re-examined by state regulators and any changes to these laws or new laws may be more restrictive or otherwise adversely affect our operations.
These laws and regulations are regularly re-examined by insurance regulators and any changes to these laws or new laws may be more restrictive or otherwise adversely affect our operations.
Private mortgage insurance competitors include Arch Capital Group Ltd., Essent Group Ltd., MGIC Investment Corporation, NMI Holdings, Inc. and Radian Group Inc. (public holding companies of competitors listed). Since 2012, we have maintained between a 12.0% and 19.2% per quarter share of the private mortgage insurance market by per annum NIW, based on data from Inside Mortgage Finance .
Private mortgage insurance competitors include Arch Capital Group Ltd., Essent Group Ltd., MGIC Investment Corporation, NMI Holdings, Inc. and Radian Group Inc. (public holding companies of competitors listed). Since 2012, we have maintained between a 12.0% and 20.4% per quarter share of the private mortgage insurance market by per annum NIW, based on data from Inside Mortgage Finance .
Reserves State insurance laws and regulations require our insurance subsidiaries to establish a special statutory contingency reserve reflected in their statutory financial statements to provide for payable claims and other expenses and purposes in the event of significant economic declines.
Reserves State insurance laws and regulations require our U.S. mortgage insurance subsidiaries to establish a special statutory contingency reserve reflected in their statutory financial statements to provide for payable claims and other expenses and purposes in the event of significant economic declines.
At this time, we cannot predict (i) the outcome of this process; (ii) which states, if any, may adopt the MGI Model; (iii) the effect changes, if any, will have on the mortgage guaranty insurance market generally, or on our business specifically; (iv) the additional costs associated with compliance with any such changes; or (v) any changes to our operations that may be necessary to comply, any of which could have a material adverse effect on our business, results of operations and financial condition.
At this time, we cannot predict (i) which states, if any, may adopt the MGI Model; (ii) the effect changes in the MGI Model may have on the mortgage guaranty insurance market generally, or on our business specifically; (iii) the additional costs associated with compliance with any such changes; or (iv) any changes to our operations that may be necessary to comply, any of which could have a material adverse effect on our business, results of operations and financial condition.
Freddie Mac has also imposed additional requirements on our option to commute these reinsurance agreements. Both GSEs reserved the right to periodically review the reinsurance transactions for treatment under PMIERs. In September 2020, subsequent to the issuance of our 2025 Senior Notes, the GSEs imposed the GSE Restrictions with respect to capital on our business.
Freddie Mac has also imposed additional requirements on our option to commute these reinsurance agreements. Both GSEs reserved the right to periodically review the reinsurance transactions for treatment under PMIERs. In September 2020, subsequent to the issuance of our 2025 Senior Notes, the GSEs imposed incremental restrictions (“GSE Restrictions”) with respect to capital on our business.
As with all NAIC model laws, this Insurance Data Security Model Law must be adopted by a state before becoming law in such state. The Insurance Data Security Model Law has not been adopted by a majority of the states. North Carolina has not adopted a version of the Insurance Data Security Model Law.
As with all NAIC model laws, this Insurance Data Security Model Law must be adopted by a state before becoming law in such state. A version of the Insurance Data Security Model Law has been adopted by over twenty states. North Carolina has not adopted a version of the Insurance Data Security Model Law.
For the years ended December 31, 2022 and 2021, approximately 71% and 65%, respectively, of our NIW by loan count went through our delegated underwriting services. Pricing Pricing is highly competitive in the mortgage insurance industry, with industry participants competing for market share, customer relationships and overall value.
For the years ended December 31, 2023 and 2022, approximately 70% and 71%, respectively, of our NIW by loan count went through our delegated underwriting services. Pricing Pricing is highly competitive in the mortgage insurance industry, with industry participants competing for market share, customer relationships and overall value.
In addition, on February 25, 2021, the FHFA announced that borrowers with a mortgage backed by the GSEs who are in an active COVID-19 forbearance plan as of February 28, 2021 may request up to two additional forbearance extensions for a maximum of 18 months of total forbearance relief.
In addition, on February 25, 2021, the FHFA announced that borrowers with a mortgage backed by the GSEs who were in an active COVID-19 forbearance plan as of February 28, 2021, could request up to two additional forbearance extensions for a maximum of 18 months of total forbearance relief.
In addition to the GSE guidelines, HOPA provides an obligation for lenders to automatically terminate a borrower’s obligation to pay for mortgage insurance coverage once the LTV ratio reaches 78% of the original value, and also provides that a borrower may request cancellation of their obligation to pay for mortgage insurance when the LTV ratio, based on the current value of the property, reaches 80%.
In addition to the GSE guidelines, HOPA provides an obligation for lenders to automatically terminate a borrower’s obligation to pay for mortgage insurance coverage once the LTV ratio reaches 78% of the original value, and also provides that a borrower may request cancellation of their obligation to pay for mortgage insurance when the LTV ratio reaches 80% of the original value.
In May 2022, the Group Capital Calculation Working Group of the NAIC adopted the 2022 GCC Instructions and Template, which will be used by a number of states, including Delaware and Virginia, for year end 2022 filings.
In May 2022, the Group Capital Calculation Working Group of the NAIC adopted the 2022 GCC Instructions and Template, which is used by a number of states, including Delaware and Virginia, for year end 2022 filings.
In 2019, we launched a separate mortgage insurance policy underwritten by our wholly owned subsidiary, Enact Mortgage Insurance Corporation of North Carolina (“EMIC-NC”), to insure primary individually underwritten residential mortgage loans as well as portfolios of residential mortgage loans at or after origination that are not intended for sale to the GSEs.
We also offer a separate mortgage insurance policy underwritten by our wholly owned subsidiary, Enact Mortgage Insurance Corporation of North Carolina (“EMIC-NC”), to insure primary individually underwritten residential mortgage loans as well as portfolios of residential mortgage loans at or after origination that are not intended for sale to the GSEs.
The Dodd-Frank Act separately granted statutory authority to the United States Department of Housing and Urban Development (“HUD”) (for FHA-insured loans), the VA (for VA-guaranteed loans), the United States Department of Agriculture (“USDA”) and Rural Housing Service (“RHS”) to develop their own definitions of a QM in consultation with the CFPB.
ATR and QM Rules In addition to the QM rules discussed above, the Dodd-Frank Act separately granted statutory authority to the United States Department of Housing and Urban Development (“HUD”) (for FHA-insured loans), the VA (for VA-guaranteed loans), the United States Department of Agriculture (“USDA”) and Rural Housing Service (“RHS”) to develop their own definitions of a QM in consultation with the CFPB.
Our remaining pool exposures are significantly seasoned and represent less than 0.2% of total risk in-force (“RIF”). Our primary insurance portfolio is diversified through time. The distribution of our exposure by book year is influenced by market size opportunities, our commercial strategies and the persistency of our in-force policies.
Our remaining pool exposures are significantly seasoned and represent only 0.1% of total risk in-force (“RIF”). Our primary insurance portfolio is diversified through time. The distribution of our exposure by book year is influenced by market size opportunities, our commercial strategies and the persistency of our in-force policies.
In addition, the PMIERs require private mortgage insurers to obtain the prior consent of the GSEs before taking certain actions, which may include entering into various intercompany agreements and commuting or reinsuring risk, among others. As of December 31, 2022, we met the PMIERs financial and operational requirements and currently hold a reasonable amount in excess of the financial requirements.
In addition, the PMIERs require private mortgage insurers to obtain the prior consent of the GSEs before taking certain actions, which may include entering into various intercompany agreements and commuting or reinsuring risk, among others. As of December 31, 2023, we met the PMIERs financial and operational requirements and currently hold capital in excess of the financial requirements.
This deferral of premiums into the contingency reserve limits our insurance subsidiaries’ ability to pay dividends to stockholders until those contingency reserves are released back into surplus. Our insurance subsidiaries’ statutory contingency reserve was approximately $3,551 million and $3,042 million as of December 31, 2022 and 2021, respectively.
This deferral of premiums into the contingency reserve limits our mortgage insurance subsidiaries’ ability to pay dividends to stockholders until those contingency reserves are released back into surplus. Our mortgage insurance subsidiaries’ statutory contingency reserve was approximately $3,960 million and $3,551 million as of December 31, 2023 and 2022, respectively.
Insurance and other regulatory authorities (including state law enforcement agencies and attorneys general) may make inquiries regarding compliance with insurance, securities and other laws and regulations, and we cooperate with such inquiries and take corrective action when warranted. 19 United States Insurance Regulation Our insurance subsidiaries are licensed and regulated in all jurisdictions in which they conduct insurance business.
Insurance and other regulatory authorities (including state law enforcement agencies and attorneys general and the BMA) may make inquiries regarding compliance with insurance, securities and other laws and regulations, and we cooperate with such inquiries and take corrective action when warranted. Insurance Company Regulation Our insurance subsidiaries are licensed and regulated in all jurisdictions in which they conduct insurance business.
In addition, the CARES Act provides that furnishers of credit reporting information, including servicers, should continue to report a loan as current to credit reporting agencies if the loan is subject to a payment accommodation, such as forbearance, so long as the borrower abides by the terms of the accommodation.
In addition, the CARES Act provided that furnishers of credit reporting information, including servicers, should report a loan as current to credit reporting agencies if the loan is subject to a payment accommodation, such as forbearance, so long as the borrower abided by the terms of the accommodation.
In addition, the PMIERs Amendment made permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future FEMA-Declared Major Disaster Areas eligible for individual assistance. Under PMIERs, we are subject to these operational and financial requirements.
In addition, the PMIERs Amendment made permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future Federal Emergency Management Agency (“FEMA”) Declared Major Disaster Areas eligible for individual assistance. Under PMIERs, we are subject to these operational and financial requirements.
Mortgage origination and servicing transactions are subject to compliance with various state and federal laws, including RESPA, HOPA, Fair Credit Reporting Act (“FCRA”), the Fair Housing Act, the Truth In Lending Act, the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”), the Dodd-Frank Act and others, including those discussed in this section.
Mortgage origination and servicing transactions are subject to compliance with various state and federal laws, including the Real Estate Settlement Procedures Act of 1974 (“RESPA”), HOPA, Fair Credit Reporting Act (“FCRA”), the Fair Housing Act, the Truth In Lending Act, the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”), the Dodd-Frank Act and others, including those discussed in this section.
Capital and Surplus Requirements Insurance regulators have the discretionary authority, in connection with maintaining the licensing of our insurance subsidiaries, to limit or restrict insurers from issuing new policies, or to take other actions, if, in the regulators’ judgment, the insurer is not maintaining a sufficient amount of surplus or reserves, or is in a hazardous financial condition.
Enact Re’s investments are in compliance with Bermudian law. 21 Capital and Surplus Requirements Insurance regulators have the discretionary authority, in connection with maintaining the licensing of our insurance subsidiaries, to limit or restrict insurers from issuing new policies, or to take other actions, if, in the regulators’ judgment, the insurer is not maintaining a sufficient amount of surplus or reserves, or is in a hazardous financial condition.
According to Inside Mortgage Finance , for the first three quarters of 2022, the FHA had a 26% share, and the VA a 25% share, of the mortgage insurance market. Our competition with government agencies is principally on the basis of price and underwriting guidelines.
According to Inside Mortgage Finance , for the first three quarters of 2023, the FHA had a 32% share, and the VA a 22% share, of the mortgage insurance market. Our competition with government agencies is principally on the basis of price and underwriting guidelines.
This strategy is based on the following priorities: Differentiate Enact from competitors • Strive to deliver best-in-class underwriting to a well-established, deep and diversified customer base. • Invest to increase differentiation, drive efficiencies, and enhance decision-making. • Seek to outpace industry average insurance-in-force growth.
This strategy is based on the following priorities: Differentiate Enact from competitors • Strive to deliver best-in-class underwriting to a well-established, deep and diversified customer base. • Invest to increase differentiation, drive efficiencies, and enhance decision-making.
The total investment expenses paid to our Parent were $5.5 million and 17 $5.2 million for the years ended December 31, 2022 and 2021, respectively. See Note 11 to our audited consolidated financial statements for further information. The investment portfolio of EHI is directed by a separate newly formed management-level EHI Investment Committee with a third-party investment manager.
The total investment expenses paid to Genworth were $5.7 million and $5.5 million for the years ended December 31, 2023 and 2022, respectively. See Note 11 to our audited consolidated financial statements for further information. The investment portfolio of EHI is directed by a separate management-level EHI Investment Committee with a third-party investment manager.
As of December 31, 2022, we had 496 full-time employees, all of whom work in the United States. Our employee population is made up of 58% women and 25% people of color. Of our employees, 46% work in our Raleigh, North Carolina office and the remaining 54% are in the field, predominantly working in sales and underwriting.
As of December 31, 2023, we had 465 full-time employees, all of whom work in the United States. Our employee population is made up of 54% women and 28% people of color. Of our employees, 50% work in our Raleigh, North Carolina office and the remaining 50% are in the field, predominantly working in sales and underwriting.
Deliver attractive risk-adjusted returns • Write profitable new business and leverage proprietary risk assessment and pricing tools to target growth and drive increased returns. • Strive to maximize stockholder value through a disciplined capital allocation policy that supports existing policyholders, grows the business, and returns excess capital to stockholders. 5 Our Industry United States Mortgage Market The United States residential mortgage market is one of the largest in the world and includes a range of private and government sponsored participants.
Deliver attractive risk-adjusted returns • Write profitable new business that delivers attractive risk-adjusted returns. • Strive to maximize stockholder value through a disciplined capital allocation policy that supports existing policyholders, invests in attractive new business opportunities and returns excess capital to stockholders. 5 Our Industry United States Mortgage Market The United States residential mortgage market is one of the largest in the world and includes a range of private and government-sponsored participants.
As of December 31, 2022, we had estimated available assets of $5,206 million against $3,156 million net required assets under PMIERs compared to available assets of $5,077 million against $3,074 million net required assets as of December 31, 2021.
As of December 31, 2023, we had estimated available assets of $5,006 million against $3,119 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.
In October 2017, the NAIC adopted a new Insurance Data Security Model Law, which establishes model standards for states to adopt regarding data security and notification of data breaches applicable to insurance licensees in states adopting such law, with provisions that are generally consistent with the NYDFS cybersecurity regulation discussed above.
In addition, the NAIC’s Insurance Data Security Model Law establishes model standards for states to adopt regarding data security and notification of data breaches applicable to insurance licensees in states adopting such law, with provisions that are generally consistent with the NYDFS cybersecurity regulation discussed above.
Our reinsurance transactions generally cover a subset of loans in a given book year and have been structured as excess of loss (“XOL”) coverage where typically both the attachment and detachment points of the ceded risk tier are within the PMIERs capital requirements at inception, providing both loss volatility protection and PMIERs capital credit.
Our traditional reinsurance program utilizes excess-of-loss (“XOL”) and quota share insurance coverage. Our XOL reinsurance transactions generally cover a subset of loans in a given book year where typically both the attachment and detachment points of the ceded risk tier are within the PMIERs capital requirements at inception, providing both loss volatility protection and PMIERs capital credit.
We have a large and diverse customer base maintaining enduring relationships across the mortgage origination market, including with national banks, non-bank mortgage lenders, local mortgage bankers, community banks and credit unions. In both 2022 and 2021, we provided new insurance coverage to approximately 1,800 customers.
We have a large and diverse customer base and maintain enduring relationships across the mortgage origination market, including with national banks, non-bank mortgage lenders, local mortgage bankers, community banks and credit unions. In 2023, we provided new insurance coverage to over 1,700 customers.
As of December 31, 2022, the fair value of our investment portfolio was $4.9 billion of fixed maturity assets, of which 98% was rated as investment grade. We also had an additional $514 million of cash and cash equivalents as of December 31, 2022.
As of December 31, 2023, the fair value of our investment portfolio was $5.3 billion of fixed maturity assets, of which 98% was rated as investment grade. We also had an additional $616 million of cash and cash equivalents as of December 31, 2023.
The sufficiency ratio as of December 31, 2022 was 165% or $2,050 million above the published PMIERs requirements, compared to 165% or $2,003 million above the published PMIERs requirements as of December 31, 2021.
The sufficiency ratio as of December 31, 2023, was 161% or $1,887 million above the published PMIERs requirements, compared to 165% or $2,050 million above the published PMIERs requirements as of December 31, 2022.
The NYDFS published initial cybersecurity regulation effective on March 1, 2017, which, along with subsequent guidance, requires all banks, insurance companies, and other financial services institutions and licensees regulated by the NYDFS, including several of our subsidiaries, to establish a cybersecurity program.
The NYDFS amended its cybersecurity regulation effective November 1, 2023, which, 28 along with subsequent guidance, requires all banks, insurance companies, and other financial services institutions and licensees regulated by the NYDFS, including several of our subsidiaries, to establish a cybersecurity program.
We actively monitor our portfolio for concentrations at the state, metropolitan statistical area and metropolitan division level in addition to economic and performance trends in these markets. As of December 31, 2022 , our largest state concentration was in California, which represented 12% of primary RIF.
Our portfolio is diverse and representative of the United States origination market. We actively monitor our portfolio for concentrations at the state, metropolitan statistical area and metropolitan division level in addition to economic and performance trends in these markets. As of December 31, 2023, our largest state concentration was in California, which represented 13% of primary RIF.
In addition to the shares sold in the IPO, 14,655,600 common shares were sold in a concurrent private sale (“Private Sale”) at a price per share of $17.86, which is equal to the IPO price less the underwriting discount share.
All shares were offered by the selling stockholder, our parent company, Genworth Holdings. In addition to the shares sold in the IPO, 14,655,600 common shares were sold in a concurrent private sale (“Private Sale”) at a price per share of $17.86, which is equal to the IPO price less the underwriting discount share.
State insurance laws and regulations also usually require the licensing of insurers and agents, and the approval of policy forms and rates. In addition, states may require actuarial justification of rates on the basis of the insurer’s loss experience, expenses and future projections.
State insurance laws and regulations also usually require the licensing of insurers and agents, and the approval of policy forms and rates. In addition, states may require actuarial justification of rates on the basis of the insurer’s loss experience, expenses and future projections. Enact Re is subject to a similar Bermudian regulatory regime.
(“EHI,” together with its subsidiaries, the “Company,” “we,” “us,” or “our”) (formerly known as Genworth Mortgage Holdings, Inc.) was a wholly owned subsidiary of Genworth Financial, Inc. (“Genworth” or “Parent”) since EHI’s incorporation in Delaware in 2012 until our initial public offering on September 20, 2021.
(“EHI,” together with its subsidiaries, the “Company,” “we,” “us,” or “our”) was a wholly owned subsidiary of Genworth Financial, Inc. (“Genworth”) since EHI’s incorporation in Delaware in 2012 until our initial public offering on September 20, 2021. On May 3, 2021, EHI amended its certificate of incorporation to change its name from Genworth Mortgage Holdings, Inc.
At the conclusion of the forbearance term, a borrower may either bring the borrower’s loan current, defer any missed payments until the end of their loan, or the loan can be modified through a repayment plan or extension of the mortgage term. Our goal is to keep borrowers in their homes.
At the conclusion of the forbearance term, a borrower could either bring the borrower’s loan current, defer any missed payments until the end of their loan, or the loan can be modified through a repayment plan or extension of the mortgage term.
GAAP are often materially different from those reflected in financial statements prepared under SAP. Market Conduct State insurance laws and regulations govern the marketplace activities of insurers, affecting the form and content of disclosure to consumers, advertising, product replacement, sales and underwriting practices and complaint and claims handling, and these provisions are generally enforced through periodic market conduct examinations.
Market Conduct State insurance laws and regulations govern the marketplace activities of insurers, affecting the form and content of disclosure to consumers, advertising, product replacement, sales and underwriting practices and complaint and claims handling, and these provisions are generally enforced through periodic market conduct examinations.
For the full years ended December 31, 2022, 2021 and 2020 we generated new insurance written (“NIW”) of $66.5 billion, $97.0 billion and $99.9 billion, respectively. Net income was $704 million, $547 million and $370 million in 2022, 2021 and 2020, respectively. Adjusted operating income was $709 million, $551 million and $373 million for 2022, 2021 and 2020, respectively.
For the full years ended December 31, 2023, 2022 and 2021 we generated new insurance written (“NIW”) of $53.1 billion, $66.5 billion and $97.0 billion, respectively. Net income was $666 million, $704 million and $547 million in 2023, 2022 and 2021, respectively. Adjusted operating income was $676 million, $708 million and $551 million for 2023, 2022 and 2021, respectively.
We value the voice of our employees and use a best-in-class third party approach to gather employee feedback. • We celebrate our talent by showcasing employee achievements and expertise in industry publications, at events and conferences, and on social media.
We value the voice of our employees and use a best-in-class third party approach to gather employee feedback. • We celebrate our talent by showcasing employee achievements and expertise in industry publications, at events and conferences, and on social media. Enact was recognized as an award winner by external organizations on five occasions throughout 2023.
We are engaged in the business of writing and assuming residential mortgage guaranty insurance. The insurance covers a portion of the unpaid principal balance of Low Down Payment Loans and protects lenders and investors against certain losses resulting from nonpayment of loans secured by mortgages, deeds of trust, or other instruments constituting a first lien on residential real estate.
The insurance covers a portion of the unpaid principal balance of Low Down Payment Loans (mortgage loans where the loan amount exceeds 80% of the value of the home) and protects lenders and investors against certain losses resulting from nonpayment of loans secured by mortgages, deeds of trust, or other instruments constituting a first lien on residential real estate.
In 2021 and 2020, our portfolio was impacted by low persistency, a large origination market and commercial success in the market, leading to a concentration in recent years as the 2022, 2021 and 2020 book years represent 25%, 33% and 22%, respectively, of our primary IIF.
In 2021 and 2020, our portfolio was impacted by low persistency, a large origination market and commercial success in the market. A period of higher persistency in 2022 and 2023 followed, leading to a more balanced concentration of IIF in recent years as the 2023, 2022 and 2021 book years represent 19%, 23% and 27%, respectively, of our primary IIF.
Fannie Mae and Freddie Mac are government-sponsored enterprises and are collectively referred to as the “GSEs.” Credit protection and liquidity through secondary market sales allow mortgage lenders to increase their lending capacity, manage risk and expand financing access to prospective homeowners, many of whom are first time home buyers (“FTHBs”).
Credit protection and liquidity through secondary market sales allow mortgage lenders to increase their lending capacity, manage risk and expand financing access to prospective homeowners, many of whom are first time home buyers (“FTHBs”).
On May 3, 2021, EHI amended its certificate of incorporation to change its name from Genworth Mortgage Holdings, Inc. This amendment also authorized EHI to issue 600,000,000 shares of common stock, each having a par value of $0.01 per share. Concurrently, we entered into a share exchange 4 agreement with Genworth Holdings, Inc.
This amendment also authorized EHI to issue 600,000,000 shares of common stock, each having a par value of $0.01 per share. Concurrently, we entered into a share exchange agreement with Genworth Holdings, Inc.
State insurance laws and regulations also require that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report” that identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.
Certain transactions may not be entered into unless the applicable regulator is given 30 days’ prior notification and does not disapprove the transaction during such 30-day period. 19 State insurance laws and regulations also require that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report” that identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.
We facilitate the sale of mortgages to the secondary market, including to private investors as well as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
We facilitate the sale of mortgages to the secondary market, including to private investors as well as 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 (collectively referred to as the “GSEs”).
The incidence of delinquency is affected by a variety of factors, including housing price appreciation or depreciation, unemployment, the level of borrower income, divorce, illness, interest rate levels, general borrower creditworthiness and macroeconomic conditions. See “1A.
We consider a loan to be delinquent when it is two or more mortgage payments past due. The incidence of delinquency is affected by a variety of factors, including housing price appreciation or depreciation, unemployment, the level of borrower income, divorce, illness, interest rate levels, general borrower creditworthiness and macroeconomic conditions. See “1A.
Our largest MSA/MD is the Chicago-Naperville, IL Metropolitan Division, which represents 3% of primary RIF. 9 Customers Our long-standing industry presence has enabled us to build active customer relationships with approximately 1,800 mortgage lenders across the United States.
Our largest Metropolitan Statistical Area (“MSA”) or Metro Division (“MD”) is the Phoenix, AZ, MSA, which represents 3% of primary RIF. 9 Customers Our long-standing industry presence has enabled us to build active customer relationships with over 1,700 mortgage lenders across the United States.
This rule is part of the process to potentially end the conservatorships of the GSEs. The final rule could cause the GSEs to increase their guarantee pricing in order to meet the new capital requirements.
This rule is part of the process to potentially end the conservatorships of the GSEs. The final rule could cause the GSEs to increase their guarantee pricing in order to meet the new capital requirements. Federal Laws RESPA applies to most residential mortgages insured by private mortgage insurers.
Our customers are broadly diversified by size, type and geography and include large money center banks, non-bank lenders, national and local mortgage bankers, community banks and credit unions. Our largest customer accounted for 18% of our total NIW in 2022 and our top five customers generated 30% of our NIW in 2022.
Our customers are broadly diversified by size, type and geography and include large money center banks, non-bank lenders, national and local mortgage bankers, community banks and credit unions. Our largest customer accounted for 19% of total NIW and 10% of our total revenues for the year ended December 31, 2023.
Numerous courts have held that the Fair Housing Act prohibits discriminatory insurance practices. In addition, both the Department of Justice (the “DOJ”) and the CFPB have pursued claims under the Fair Housing Act on a disparate impact theory as well. There has been litigation over the Fair Housing Act involving other mortgage insurers, resulting in some cases in court-approved settlements.
Numerous courts have held that the Fair Housing Act prohibits discriminatory insurance 25 practices. In addition, both the Department of Justice (the “DOJ”) and the CFPB have pursued claims under the Fair Housing Act on a disparate impact theory as well.
Some of our key areas of focus include: • Our compensation package, including salary, incentive bonus and long-term incentives, aligns employee and stockholder interests, as well as rewards our employees for serving all of our current and future customers. • In addition to a competitive compensation program, we offer our employees benefits such as life and health insurance, paid time off, paid parental leave, childcare subsidies, retirement savings plans, financial planning services, an Employee Assistance Program and a broad fitness reimbursement program to support physical and mental health. 18 • We offer a multitude of professional development and career enrichment courses, including in the areas of leadership, professional skills, and industry-specific matters, as well as a mentor program and an extensive training program for future senior leaders.
None of our employees are represented by a union or subject to a collective servicing agreement and management believes that our relationship with our employees is good. 17 Some of our key areas of focus include: • Our compensation package, including salary, incentive bonus and long-term incentives, aligns employee and stockholder interests, as well as rewards our employees for serving all of our current and future customers. • In addition to a competitive compensation program, we offer our employees benefits such as life and health insurance, paid time off, paid parental leave, childcare subsidies, retirement savings plans, financial planning services, an Employee Assistance Program and a broad fitness reimbursement program to support physical and mental health.
Risk Factors—Risks Relating to Our Business—Our risk management programs may not be effective in identifying or adequate in controlling or mitigating the risks we face.” Modeling and Analytics We use our proprietary risk modeling platform to evaluate returns and volatility through both an external regulatory lens and an economic capital framework that is sensitive to the economic cycle and current housing market conditions.
Modeling and Analytics We use our proprietary risk modeling platform to evaluate returns and volatility through both an external regulatory lens and an economic capital framework that is sensitive to the economic cycle and current housing market conditions.
Privacy of Consumer Information and Cybersecurity Federal and state laws and regulations require financial institutions, including insurance companies, to protect, among other things, the security and confidentiality of consumer financial information and to notify consumers about policies and practices relating to the collection and disclosure of consumer information and policies relating to protecting the security and confidentiality of that information and to notify regulators and consumers in the event of certain data breaches affecting personal information.
Privacy of Consumer Information and Cybersecurity Federal and state laws and regulations require financial institutions, including insurance companies, to protect the security and confidentiality of consumer financial information and to notify consumers about policies and practices relating to the collection, use, disclosure, security, and confidentiality of their personally identifiable information.
As of December 31, 2022, we had a published PMIERs sufficiency ratio of 165%, representing $2,050 million of available assets above the published PMIERs requirement and approximately 89% of our insured portfolio was covered by our CRT program.
As of December 31, 2023, we had a PMIERs sufficiency ratio of 161%, representing $1,887 million of available assets above the PMIERs requirement and approximately 90% of our insured portfolio was covered by our CRT program. Our Corporate Information Enact Holdings, Inc.
Among the most significant of these laws and regulations are the Dodd-Frank Act QM and the ability-to-repay (“ATR”) Requirement and the qualified residential mortgage (“QRM”) securitization risk retention provisions.
Regulation of Mortgage Origination Private mortgage insurers are also indirectly impacted by federal law and regulation affecting mortgage originators and lenders, purchasers of mortgage loans and governmental insurers. Among the most significant of these laws and regulations are the Dodd-Frank Act QM and the ability-to-repay (“ATR”) Requirement and the qualified residential mortgage (“QRM”) securitization risk retention provisions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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FHFA contemplates that the compliance dates for the PCCBA and the PLBA will be the date of termination of the conservatorship of a GSE. The Enterprise Capital Framework’s advanced approaches requirements will be delayed until the later of (i) January 1, 2025 and (ii) any later compliance date provided by a transition order applicable to such GSE.
FHFA contemplates that the compliance dates for the PCCBA and the PLBA will be the date of termination of the conservatorship of a GSE. The Enterprise Capital Framework’s Advanced Approaches requirements will be delayed until the later of (i) January 1, 2025 and (ii) any later compliance date provided by a transition order applicable to such GSE.
As a credit enhancement provider in the residential mortgage lending industry, we are also subject to compliance with or otherwise impacted by various federal and state consumer protection and insurance laws, including RESPA, the Fair Housing Act of 1968 (the “Fair Housing Act”), HOPA, the FCRA and others.
As a credit enhancement provider in the residential mortgage lending industry, we are also subject to compliance with or otherwise impacted by various federal and state consumer protection and insurance laws, including RESPA, the Fair Housing Act of 1968 (the “Fair Housing Act”), HOPA, FCRA and others.
Factors that could lead to a decrease in the volume of Low Down Payment Loan originations include, but are not limited to: • an increase in home mortgage interest rates • limitations on the tax benefits of home ownership and mortgage interest; • implementation of more rigorous mortgage lending regulation, such as under the Dodd-Frank Act; • a decline in economic conditions generally, or in conditions in regional and local economies; • events outside of our control, including natural and man-made disasters and pandemics adversely affecting housing markets and home buying; • the level of consumer confidence, which may be adversely affected by economic instability, war or terrorist events; • an increase in the price of homes relative to income levels; • a lack of housing supply at lower home prices; • adverse population trends, including lower homeownership rates; • high rates of home price appreciation, which for refinancings affect whether refinanced loans have LTV ratios that require mortgage insurance; and • changes in government housing policy encouraging loans to FTHBs.
Factors that could lead to a decrease in the volume of Low Down Payment Loan originations include, but are not limited to: • an increase in home mortgage interest rates; • limitations on the tax benefits of home ownership and mortgage interest; • implementation of more rigorous mortgage lending regulation, such as under the Dodd-Frank Act; • a decline in economic conditions generally, or in conditions in regional and local economies; • events outside of our control, including natural and man-made disasters and pandemics adversely affecting housing markets and home buying; • the level of consumer confidence, which may be adversely affected by economic instability, war or terrorist events; 46 • an increase in the price of homes relative to income levels; • a lack of housing supply at lower home prices; • adverse population trends, including lower homeownership rates; • high rates of home price appreciation, which for refinancings affect whether refinanced loans have LTV ratios that require mortgage insurance; and • changes in government housing policy encouraging loans to FTHBs.
In any particular year, statutory surplus amounts, statutory contingency reserve amounts, and the RTC ratio may increase or decrease depending on a variety of factors, most of which are outside of our control, including, but not limited to, the following: • the amount of statutory income or losses generated by our insurance subsidiaries (which itself is sensitive to equity market and credit market conditions); • the amount of insurance we onboard; • the amount of additional capital our insurance subsidiaries must hold to support business growth; • changes in statutory accounting or reserve requirements applicable to our insurance subsidiaries; • our ability to access capital markets to provide reserve and surplus relief; • changes in equity market levels; • the value of certain fixed-income and equity securities in our investment portfolio; • changes in the credit ratings of investments held in our portfolio; • the value of certain derivative instruments; • changes in interest rates; • credit market volatility; and • changes to the maximum permissible RTC ratio.
In any particular year, statutory surplus amounts, statutory contingency reserve amounts, and the RTC ratio may increase or decrease depending on a variety of factors, most of which are outside of our control, including, but not limited to, the following: • the amount of statutory income or losses generated by our insurance subsidiaries (which itself is sensitive to equity market and credit market conditions); • the amount of insurance we onboard; • the amount of additional capital our insurance subsidiaries must hold to support business growth; • changes in statutory accounting or reserve requirements applicable to our insurance subsidiaries; • our ability to access capital markets to provide reserve and surplus relief; • changes in equity market levels; • the value of certain fixed-income and equity securities in our investment portfolio; • changes in the credit ratings of investments held in our portfolio; • the value of certain derivative instruments; 50 • changes in interest rates; • credit market volatility; and • changes to the maximum permissible RTC ratio.
The GSEs may amend or waive PMIERs at their discretion, impose additional conditions or restrictions on us and also have broad discretion to interpret PMIERs, which could impact the calculation of our “Available Assets” and/or “Minimum Required Assets.” The amount of capital that EMICO may be required in the future to maintain the “Minimum Required Assets” as defined in PMIERs, and operate our business is dependent upon, among other things: (i) the way PMIERs are applied and interpreted by the GSEs and the FHFA; (ii) the future performance of the housing market; (iii) our generation of earnings in our business, “Available Assets” and “Minimum Required Assets,” reducing RIF and reducing delinquencies as anticipated, and writing anticipated amounts and types of new mortgage insurance business; and (iv) our overall financial performance, capital and liquidity levels.
The GSEs may amend or waive PMIERs at their discretion, impose additional conditions or restrictions on us and also have broad discretion to interpret PMIERs, any of which could impact the calculation of our “Available Assets” and/or “Minimum Required Assets.” The amount of capital that EMICO may be required in the future to maintain the “Minimum Required Assets” as defined in PMIERs, and operate our business is dependent upon, among other things: (i) the way PMIERs are applied and interpreted by the GSEs and the FHFA; (ii) the future performance of the housing market; (iii) our generation of earnings in our business, “Available Assets” and “Minimum Required Assets,” reducing RIF and reducing delinquencies as anticipated, and writing anticipated amounts and types of new mortgage insurance business; and (iv) our overall financial performance, capital and liquidity levels.
Factors that tend to reduce the length of time our mortgage insurance remains in-force include: • declining interest rates, which may result in the refinancing of the mortgages underlying our mortgage insurance coverage with new mortgage loans that may not require mortgage insurance or that we do not insure; 54 • customer concentration levels with certain customers that actively market refinancing opportunities to their existing borrowers; • significant appreciation in the value of homes, which causes the unpaid balance of the mortgage to decrease below 80% of the value of the home and enables the borrower to request cancellation of the mortgage insurance; and • changes in mortgage insurance cancellation requirements or procedures of the GSEs or under applicable law.
Factors that tend to reduce the length of time our mortgage insurance remains in-force include: • declining interest rates, which may result in the refinancing of the mortgages underlying our mortgage insurance coverage with new mortgage loans that may not require mortgage insurance or that we do not insure; • customer concentration levels with certain customers that actively market refinancing opportunities to their existing borrowers; • significant appreciation in the value of homes, which causes the unpaid balance of the mortgage to decrease below 80% of the value of the home and enables the borrower to request cancellation of the mortgage insurance; and • changes in mortgage insurance cancellation requirements or procedures of the GSEs or under applicable law.
We compete with the FHA and the VA, as well as certain local-and state-level housing finance agencies. Separately, the GSEs compete with us through certain of their risk-sharing insurance programs. Those competitors may establish pricing terms and business practices that may be influenced by motives such as advancing social housing policy or stabilizing the mortgage lending industry.
Additionally, we compete with the FHA and the VA, as well as certain local-and state-level housing finance agencies. Separately, the GSEs compete with us through certain of their risk-sharing insurance programs. Those competitors may establish pricing terms and business practices that may be influenced by motives such as advancing social housing policy or stabilizing the mortgage lending industry.
We also have arrangements in place with our partners and other third-party service providers through which we share and receive information, including the submission of new mortgage insurance applications. We also rely on these systems throughout our business for a variety of functions, including processing claims, providing information to customers, performing actuarial analyses and maintaining financial records.
We also have arrangements in place with our customers and other third-party service providers through which we share and receive information, including the submission of new mortgage insurance applications. We also rely on these systems throughout our business for a variety of functions, including processing claims, providing information to customers, performing actuarial analyses and maintaining financial records.
In addition, our customers use of technology solutions to deliver rate quotes from mortgage insurers has placed an additional emphasis on price, including emerging tools that provide the ability to automate the selection of a mortgage insurance provider based on price alone. These factors may result in mortgage insurance companies responding aggressively resulting in further lowering of premiums.
In addition, our customers use of technology solutions to deliver rate quotes from mortgage insurers has 36 placed an additional emphasis on price, including emerging tools that provide the ability to automate the selection of a mortgage insurance provider based on price alone. These factors may result in mortgage insurance companies responding aggressively resulting in further lowering of premiums.
Those motives may not be consistent with maximizing return on capital or other profitability measures. In addition, those governmental enterprises typically do not have the same capital requirements or costs of capital that we and other mortgage insurance companies have and therefore may have financial flexibility in their pricing and capacity that could put us at a competitive disadvantage.
Those motives may not be consistent with maximizing return on capital or other profitability measures. In 39 addition, those governmental enterprises typically do not have the same capital requirements or costs of capital that we and other mortgage insurance companies have and therefore may have financial flexibility in their pricing and capacity that could put us at a competitive disadvantage.
In assigning financial strength ratings, we believe the rating agencies consider several factors, including but not limited to, the adequacy of the mortgage insurer’s capital to withstand high claim scenarios, a mortgage insurer’s historical and projected operating performance, a mortgage insurer’s enterprise risk management framework, parent company financial strength, business outlook, competitive position, management and corporate strategy.
In assigning financial strength ratings, we believe the rating agencies consider several factors, including but not limited to, the adequacy of the mortgage insurer’s capital to withstand high claim scenarios, a mortgage insurer’s historical and projected operating 43 performance, a mortgage insurer’s enterprise risk management framework, parent company financial strength, business outlook, competitive position, management and corporate strategy.
An adverse change in our RTC ratio or our ability to meet other minimum regulatory requirements could cause rating agencies to downgrade our financial strength ratings, which could have an adverse 58 impact on our ability to write and retain business and could cause regulators to take regulatory or supervisory actions with respect to our business, all of which could have a material adverse effect on our results of operations, financial condition and business.
An adverse change in our RTC ratio or our ability to meet other minimum regulatory requirements could cause rating agencies to downgrade our financial strength ratings, which could have an adverse impact on our ability to write and retain business and could cause regulators to take regulatory or supervisory actions with respect to our business, all of which could have a material adverse effect on our results of operations, financial condition and business.
However, any such event or the risk (or perceived risk) that any such proceedings could involve us, could negatively affect our ratings, our reputation, our business, our liquidity and results of operations, and could therefore have a negative effect on our ability to repay our own indebtedness, 63 including the 2025 Senior Notes, or otherwise could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
However, any such event or the risk (or perceived risk) that any such proceedings could involve us, could negatively affect our ratings, our reputation, our business, our liquidity and results of operations, and could therefore have a negative effect on our ability to repay our own indebtedness, including the 2025 Senior Notes, or otherwise could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
While we have succession plans and long-term compensation plans, including retention programs, designed to retain our employees, our succession plans may not operate effectively, and our compensation plans cannot guarantee that the services of these employees will continue to be available to us. We rely upon third-party vendors who may be unable or unwilling to meet their obligations to us.
While we have succession plans and long-term compensation plans, including retention programs, designed to retain our employees, our succession plans may not operate effectively, and our compensation plans cannot guarantee that the services of our employees will continue to be available to us. We rely upon third-party vendors who may be unable or unwilling to meet their obligations to us.
Additionally, compliance with PMIERs requires us to seek the GSEs’ prior approval before taking many actions, including implementing certain new products or services, entering into inter-company agreements among others. PMIERs’ prior approval requirements could prohibit, materially modify or delay us in our intended course of action.
Additionally, compliance with PMIERs requires us to seek the GSEs’ prior approval before taking many actions, including implementing certain new products or services and entering into inter-company agreements, among others. PMIERs’ prior approval requirements could prohibit, materially modify or delay us in our intended course of action.
While it is uncertain the extent to which such events may impact our business, the consequences of these events and actions taken by governmental authorities, the GSEs, our customers or others in connection therewith could lead to disruption of the economy, which may erode consumer and investor confidence levels or lead to increased volatility in the financial markets.
While it is uncertain the extent to which such events may impact our business, the consequences of these events and actions taken by governmental authorities, the GSEs, our customers or others in connection therewith could lead to disruption of the economy, which may erode consumer and investor confidence levels or lead to increased volatility in the financial and housing markets.
GAAP financial statements based on claim rates and severity for loans that servicers have reported to us as being in default, which is typically after the second missed payment. We also establish incurred but not reported (“IBNR”) reserves for estimated losses incurred on loans in default that have not yet been reported to us by servicers.
GAAP financial statements based on claim rates and severity for loans that servicers have reported to us as being in default, which is typically after the second 34 missed payment. We also establish incurred but not reported (“IBNR”) reserves for estimated losses incurred on loans in default that have not yet been reported to us by servicers.
If we were to cease to be a member of the Genworth Consolidated Group, our income could no longer offset tax losses of other members of the Genworth Consolidated Group, and the Genworth Consolidated Group may not have sufficient taxable income from other operations to fully absorb the anticipated tax deductions of our Parent and its non-insurance subsidiaries, reducing the value of such tax deductions to our Parent.
If we were to cease to be a member of the Genworth Consolidated Group, our income could no longer offset tax losses of other members of the Genworth Consolidated Group, and the Genworth Consolidated Group may not have sufficient taxable income from other operations to fully absorb the anticipated tax deductions of Genworth and its non-insurance subsidiaries, reducing the value of such tax deductions to Genworth.
Inability to maintain sufficient regulatory capital could result in restrictions or prohibitions on our doing business or impact our financial strength ratings which could have a material adverse impact on our business, results of operations and financial condition. We are required by certain states and other regulators to maintain certain RTC ratios.
Inability to maintain sufficient regulatory capital could result in restrictions or prohibitions on our doing business or impact our financial strength ratings which could have a material adverse impact on our business, results of operations and financial condition. We are required by certain states and other regulators to maintain certain RTC ratios and other capital standards.
While we have certain contractual protections and perform third-party vendor due diligence procedures, there is no assurance that third-party vendors will provide accurate and complete information to us, meet their obligations on a timely basis and adhere to the provisions of our agreements.
While we have certain contractual protections and perform third-party vendor due diligence procedures, there is no assurance that third-party vendors will provide accurate and complete information to us, meet their obligations on a timely basis or adhere to the provisions of our agreements.
For our less liquid securities, such as our privately placed securities, we utilize independent market data to employ alternative valuation methods commonly used in the financial services industry to estimate fair value. Based on the market observability of the inputs used in estimating the fair value, the pricing level is assigned.
For our less liquid securities, such as our privately placed securities, we utilize independent market data to employ alternative valuation methods commonly used in the 44 financial services industry to estimate fair value. Based on the market observability of the inputs used in estimating the fair value, the pricing level is assigned.
Declining housing values may impact the effectiveness of our loss 38 management programs, eroding the value of mortgage collateral and reducing the likelihood that properties with defaulted mortgages can be sold for an amount sufficient to offset unpaid principal and interest losses.
Declining housing values may impact the effectiveness of our loss management programs, eroding the value of mortgage collateral and reducing the likelihood that properties with defaulted mortgages can be sold for an amount sufficient to offset unpaid principal and interest losses.
Our inability to fund or raise the capital required in the anticipated timeframes and on the anticipated terms, could have a material adverse impact on our business, results of operations and financial condition, including causing us to reduce our business levels or be subject to a variety of regulatory actions.
Our inability to fund or raise the capital required in the anticipated timeframes and on the anticipated terms, could have a material adverse impact on our business, results of operations and 42 financial condition, including causing us to reduce our business levels or be subject to a variety of regulatory actions.
In addition, the nature and extent of regulation could materially change, which may result in additional costs associated with compliance with any such changes, or changes to our operations that may be necessary to comply, any of which may have a material adverse effect on our business.
In addition, the nature and extent of regulation could materially change, which may result in additional costs associated with compliance with any such changes, or 48 changes to our operations that may be necessary to comply, any of which may have a material adverse effect on our business.
Accordingly, for any taxable periods for which we are included in the Genworth Consolidated Group for U.S. federal income tax purposes, we could be liable in the event that any income tax liability was incurred but was not discharged by the Parent or any other member of the group.
Accordingly, for any taxable periods for which we are included in the Genworth Consolidated Group for U.S. federal income tax purposes, we could be liable in the event that any income tax liability was incurred but was not discharged by Genworth or any other member of the group.
Although we have implemented controls and continue to train our employees, a cybersecurity 68 event could still occur that would cause damage to our reputation with our customers and other stakeholders and could have a material adverse effect on our business, results of operations and financial condition.
Although we have implemented controls and continue to train our employees, a cybersecurity event could still occur that would cause damage to our reputation with our customers and other stakeholders and could have a material adverse effect on our business, results of operations and financial condition.
Also, customer concentration may adversely affect our financial condition if a significant customer chooses to increase its use of other mortgage insurers, merges with a competitor or exits the mortgage 45 finance business, chooses alternatives to mortgage insurance, or experiences a decrease in their business.
Also, customer concentration may adversely affect our financial condition if a significant customer chooses to increase its use of other mortgage insurers, merges with a competitor or exits the mortgage finance business, chooses alternatives to mortgage insurance, or experiences a decrease in their business.
We are currently a member of the Genworth Consolidated Group, and we expect to continue to be a member as long as our Parent continues to own an amount of our stock which possesses at least 80% of the total voting power of our stock, and it has a value equal to at least 80% of the total value of our stock.
We are currently a member of the Genworth Consolidated Group, and we expect to continue to be a member as long as Genworth continues to own an amount of our stock which possesses at least 80% of the total voting power of our stock, and it has a value equal to at least 80% of the total value of our stock.
The methodologies, estimates and assumptions we use in 51 valuing our investment securities evolve over time and are subject to different interpretation (including based on developments in relevant accounting literature), all of which can lead to changes in the value of our investment securities.
The methodologies, estimates and assumptions we use in valuing our investment securities evolve over time and are subject to different interpretation (including based on developments in relevant accounting literature), all of which can lead to changes in the value of our investment securities.
Lower primary persistency rates result in reduced IIF and earned premiums, which could have a significant adverse impact on our results of operations. In addition, interest rate fluctuations could also have an adverse effect on the results of our investment portfolio.
Lower primary persistency rates can result in reduced IIF and earned premiums, which could have a significant adverse impact on our results of operations. In addition, interest rate fluctuations could also have an adverse effect on the results of our investment portfolio.
Increased regulatory scrutiny and any resulting investigations or legal proceedings could result in new legal precedents and industry-wide regulations or practices that could have a material adverse effect on our business, results of operations and financial condition.
Increased regulatory scrutiny and any resulting investigations or legal proceedings could result in new legal 49 precedents and industry-wide regulations or practices that could have a material adverse effect on our business, results of operations and financial condition.
As a condition to us remaining a member of the Genworth Consolidated Group, our Parent generally must continue to own an amount of our stock which possesses at least 80% of the total voting power of our stock and has a value equal to at least 80% of the total value of our stock.
As a condition to us remaining a member of the Genworth Consolidated Group, Genworth generally must continue to own an amount of our stock which possesses at least 80% of the total voting power of our stock and has a value equal to at least 80% of the total value of our stock.
Changes in the charters or business practices of either Fannie Mae or Freddie Mac could materially reduce the number of mortgages they purchase that are 42 insured by us and consequently diminish our business valuation.
Changes in the charters or business practices of either Fannie Mae or Freddie Mac could materially reduce the number of mortgages they purchase that are insured by us and consequently diminish our business valuation.
Our compensation policies and procedures are reviewed by us as part of our overall risk management program, but it is possible that such compensation policies and practices could inadvertently incentivize excessive or inappropriate risk taking.
Our compensation policies and procedures are reviewed by us as part of our overall risk management program, but it is possible that such compensation policies and practices could 41 inadvertently incentivize excessive or inappropriate risk taking.
While management 66 continually reviews the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time.
While management continually reviews the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time.
If we are unable to continue to meet the requirements mandated by PMIERs, the GSE Restrictions and any additional restrictions imposed on us by the GSEs, whether because the GSEs amend them or the GSEs’ interpretation of the financial requirements requires us to hold amounts of capital that are higher than we have planned or otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of operations and financial condition.
If we are unable to continue to meet the requirements mandated by PMIERs, or any additional restrictions which may be imposed on us by the GSEs, whether because the GSEs amend them or the GSEs’ 32 interpretation of the financial requirements requires us to hold amounts of capital that are higher than we have planned or otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of operations and financial condition.
While it is our goal to safeguard information assets from physical theft and cybersecurity threats, there can be no assurance that our information security will detect and protect information assets from these ever-increasing risks.
While it is our goal to safeguard information assets from physical theft and cybersecurity threats, there can be no 59 assurance that our information security will detect and protect information assets from these ever-increasing risks.
If the GSEs increase their guarantee pricing in order to meet the higher capital requirements, that increase could have a negative 59 impact on the private mortgage insurance market and our business.
If the GSEs increase their guarantee pricing in order to meet the higher capital requirements, that increase could have a negative impact on the private mortgage insurance market and our business.
These alternatives include: • originating mortgages that consist of two simultaneous loans, known as “simultaneous seconds” comprising a first mortgage with an LTV ratio of 80% and a simultaneous second mortgage for the excess portion of the loan, instead of a single mortgage with an LTV ratio of more than 80%; • using government mortgage insurance programs; • holding mortgages in the lenders’ own loan portfolios and self-insuring; • using programs, such as those offered by Fannie Mae and Freddie Mac, requiring lower mortgage insurance coverage levels; • originating and securitizing loans in MBS whose underlying mortgages are not insured with private mortgage insurance or which are structured so that the risk of default lies with the investor, rather than a private mortgage insurer; and • using risk-sharing insurance programs, credit default swaps or similar instruments, instead of private mortgage insurance, to transfer credit risk on mortgages.
These alternatives include: • originating mortgages that consist of two simultaneous loans, known as “simultaneous seconds,” comprising a first mortgage with an LTV ratio of 80% and a simultaneous second mortgage for the excess portion of the loan, instead of a single mortgage with an LTV ratio of more than 80%; • using government mortgage insurance programs; • holding mortgages in the lenders’ own loan portfolios and self-insuring; • using programs, such as those offered by Fannie Mae and Freddie Mac, requiring lower mortgage insurance coverage levels; • originating and securitizing loans in MBS whose underlying mortgages are not insured with private mortgage insurance, or which are structured so that the risk of default lies with the investor, rather than a private mortgage insurer; and • using risk-sharing insurance programs, credit default swaps or similar instruments, instead of private mortgage insurance, to transfer credit risk on mortgages.
We are exposed to various risks arising out of natural and man-made disasters and public health emergencies, including earthquakes, hurricanes, floods, wildfires, tornadoes, other extreme weather events, acts of terrorism, military actions (including international activity that impacts the United States’ economy, such as the current geopolitical unrest in Ukraine) and pandemics, similar to COVID-19.
We are exposed to various risks arising out of natural and man-made disasters and public health emergencies, including earthquakes, hurricanes, floods, wildfires, tornadoes, other extreme weather events, acts of terrorism, military actions (including international activity that impacts the United States’ economy, such as the current geopolitical unrest in Ukraine and the Middle East) and pandemics, similar to COVID-19.
See “—CRT transactions may not be available, affordable or adequate to protect us against losses” and “—If we are unable to continue to meet the requirements mandated by PMIERs, the GSE Restrictions and any additional restrictions imposed on us by the GSEs, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of operations and financial condition.” In order to preserve certain tax benefits it obtains from consolidation, our Parent is expected to hold at least 80% of our common stock.
See “—CRT transactions may not be available, affordable or adequate to protect us against losses” and “—If we are unable to continue to meet the requirements mandated by PMIERs, or any additional restrictions which may be imposed on us by the GSEs, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of operations and financial condition.” In order to preserve certain tax benefits it obtains from consolidation, Genworth is expected to hold at least 80% of our common stock.
If a servicer was to experience adverse effects to its business, such servicer could experience delays in its reporting and premium payment requirements. Without reliable, consistent third-party servicing, we may be unable to receive and process payments on insured loans and/or properly recognize and establish reserves on loans when a delinquency exists or occurs but is not reported to us.
If a servicer were to experience adverse effects to its business, such servicer could experience delays in its reporting and premium payment requirements. Without reliable, consistent third-party servicing, we may be unable to receive and process payments on insured loans and/or properly recognize and establish reserves on loans when a delinquency exists or occurs but is not reported to us.
See “— Our Parent’s continued ownership of at least 80% of our common stock may limit our ability to raise additional capital by issuing common stock to third parties.” As a result, no assurance can be given that we will be able to continue to pay dividends to our shareholders, repurchase our common stock, or return capital through other means, in the future or that the level of any future dividends or other return of capital will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect the market price of our common stock.
See “— Genworth’s continued ownership of at least 80% of our common stock may limit our ability to raise additional capital by issuing common stock to third parties.” 62 As a result, no assurance can be given that we will be able to continue to pay dividends to our shareholders, repurchase our common stock, or return capital through other means, in the future or that the level of any future return of capital will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect the market price of our common stock.
These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2022.
These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023.
As part of our overall risk and capital management strategy, we use CRT transactions. These transactions enable our mortgage insurance business to transfer risks in exchange for some of the associated economic benefits and, as a result, improve our PMIERs and other regulatory RTC measurements and manage risk to within our anticipated tolerance level.
As part of our overall risk and capital management strategy, we use CRT transactions which enable our mortgage insurance business to transfer risks in exchange for some of the associated economic benefits and, as a result, improve our PMIERs and other regulatory RTC measurements and manage risk to within our anticipated tolerance level.
However, the implementation of any further CRT transactions or other transactions with third parties to provide additional capital depends on a number of factors, including but not limited to: market conditions, necessary third-party approvals (including approval by regulators and the GSEs) and other factors that are outside of our control.
Additionally, the implementation of any further CRT transactions or other transactions with third parties to provide additional capital depends on a number of factors, including but not limited to: market conditions, necessary third-party approvals (including approval by regulators and the GSEs) and other factors that are outside of our control.
Despite the implementation of security controls and back-up measures, our computer systems and those of our partners and third-party service providers have been and may be in the future vulnerable to system failures, physical or electronic intrusions, computer malware or other attacks, programming errors and similar disruptive problems.
Despite the implementation of security controls and back-up measures, our computer systems and those of our customers and third-party service providers have been and may be in the future vulnerable to system failures, physical or electronic intrusions, computer malware or other attacks, programming errors and similar disruptive problems.
Additionally, we may be subject to reputational harm if our Parent or any of its affiliates, previously, or in the future, among other things, becomes subject to litigation or otherwise damages its reputation or business prospects. Any of these events could adversely affect our business, results of operations and financial condition.
Additionally, we may be subject to reputational harm if Genworth or any of its affiliates, previously, or in the future, among other things, becomes subject to litigation or otherwise damages its reputation or business prospects. Any of these events could adversely affect our business, results of operations and financial condition.
State insurance regulators and the NAIC regularly re-examine existing laws and regulations, which may lead to modifications to SAP, interpretations of existing laws and the development of new laws and 56 regulations applicable to insurance companies and their products. Further, we could become subject to future legislation or regulatory requirements related to climate change.
Insurance regulators and the NAIC regularly re-examine existing laws and regulations, which may lead to modifications to SAP, interpretations of existing laws and the development of new laws and regulations applicable to insurance companies and their products. Further, we could become subject to future legislation or regulatory requirements related to climate change.
Thus, our ability to raise additional capital by issuing stock to third parties will be limited. See “—Our Parent's continued ownership of at least 80% of our common stock may limit our ability to raise additional capital by issuing common stock to third parties.” CRT transactions may not be available, affordable or adequate to protect us against losses.
Thus, our ability to raise additional capital by issuing stock to third parties will be limited. See “—Genworth's continued ownership of at least 80% of our common stock may limit our ability to raise additional capital by issuing common stock to third parties.” CRT transactions may not be available, affordable or adequate to protect us against losses.
As a result, our Parent controls all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our amended and restated certificate of incorporation and our amended and restated bylaws; and our winding up and dissolution.
As a result, Genworth controls all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our amended and restated certificate of incorporation and our amended and restated bylaws; and our winding up and dissolution.
The models require accurate data, including financial statements, credit reports or other financial information, and reliance on such data could result in unexpected losses, reputational damage or other effects that could have a material adverse effect on our business, results of operations and financial condition.
The models require accurate data, including financial statements, credit reports or other financial information, and reliance on inaccurate data could result in unexpected losses, reputational damage or other effects that could have a material adverse effect on our business, results of operations and financial condition.
However, the GSEs will not be subject to any requirement under the Enterprise Capital Framework until the applicable compliance date.
However, the GSEs will not be subject to any requirement under the Enterprise Capital Framework until 51 the applicable compliance date.
As a standalone company, we may be unable to obtain such goods and services at comparable prices or on terms as favorable as those provided by our Parent, either of which could adversely affect our business, results of operations or financial condition.
As a standalone company, we may be unable to obtain such goods and services at comparable prices or on terms as favorable as those provided by Genworth, either of which could adversely affect our business, results of operations or financial condition.
This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of our Parent may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us.
This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of Genworth may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us.
Our Parent’s challenges in its long-term care insurance business, or other financial or operational difficulties, may also be attributed to us by investors and may have an adverse effect on the perception of our common stock as an investment.
Genworth’s challenges in its long-term care insurance business, or other financial or operational difficulties, may also be attributed to us by investors and may have an adverse effect on the perception of our common stock as an investment.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitive information, which could include personally identifiable information or other user data, may result in governmental investigations, enforcement actions, regulatory fines, litigation and public statements against us by consumer advocacy groups or others, and could cause our customers to lose trust in us, all of which could be costly and have an adverse effect on our business, results of operations and financial condition.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized access to sensitive information, which could include personally identifiable information or other data, may result in governmental investigations, enforcement actions, regulatory fines, litigation and public statements against us by consumer advocacy groups or others, and could cause our customers to lose trust in us, all of which could be costly and have an adverse effect on our business, results of operations and financial condition.
Subject to certain exceptions, if our Parent has higher tax basis in our 65 shares than the fair market value of our shares at the time we left the Genworth Consolidated Group, these rules could require us to reduce certain of our tax attributes, including the tax basis in our assets.
Subject to certain exceptions, if Genworth has higher tax basis in our shares than the fair market value of our shares at the time we left the Genworth Consolidated Group, these rules could require us to reduce certain of our tax attributes, including the tax basis in our assets.
Our delegation of loss mitigation decisions to the GSEs is subject to cancellation, but exercise of our cancellation rights may have an adverse effect on our relationship with the GSEs and customers. 52 Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims.
Our delegation of loss mitigation 45 decisions to the GSEs is subject to cancellation, but exercise of our cancellation rights may have an adverse effect on our relationship with the GSEs and customers. Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims.
In addition, we have entered into agreements with our Parent and its subsidiaries that provide a framework for our ongoing relationship, including a Master Agreement, a registration rights agreement, a Shared Services Agreement, an intellectual property cross license agreement and a transitional trademark license agreement.
In addition, we have entered into agreements with Genworth and its subsidiaries that provide a framework for our ongoing relationship, including a Master Agreement, a registration rights agreement, a Shared Services Agreement, an intellectual property cross license agreement and a transitional trademark license agreement.
Other risk management methods are based on our evaluation of information regarding markets, customers and customer behavior, macroeconomic and environmental conditions, catastrophic occurrences and potential changing paradigms that are publicly available or otherwise accessible to us. See “Business—Risk Management.” This collective information may not always be accurate, complete, up to date or properly considered, interpreted or evaluated in our analyses.
Other risk management methods are based on our evaluation of information regarding markets, customers and customer behavior, macroeconomic and environmental conditions, catastrophic occurrences and potential changing paradigms that are publicly available or otherwise accessible to us. This collective information may not always be accurate, complete, up to date or properly considered, interpreted or evaluated in our analyses.
See “—We could be affected by issues 50 affecting our Parent in a way that could materially and adversely affect our business, financial condition, liquidity and prospects.” Further, a rating is based on information furnished by us or obtained by the relevant rating agency from its own sources and is subject to revision, suspension or withdrawal by the rating agency at any time.
See “—We could be affected by issues affecting Genworth in a way that could materially and adversely affect our business, financial condition, liquidity and prospects.” Further, a rating is based on information furnished by us or obtained by the relevant rating agency from its own sources and is subject to revision, suspension or withdrawal by the rating agency at any time.
If such reduction occurred, we could be required to pay more income tax in the future. Our Parent could, at such time, elect to reduce its tax basis in our shares at such time to prevent such attribute reduction, although our Parent has not committed to do so.
If such reduction occurred, we could be required to pay more income tax in the future. Genworth could, at such time, elect to reduce its tax basis in our shares at such time to prevent such attribute reduction, although Genworth has not committed to do so.
The significant increases in mortgage rates during 2022, driven by monetary and fiscal policies designed at combating continued inflationary pressures, caused a decline in the mortgage insurance market, which reduced our NIW for the year.
The significant increases in mortgage rates during 2022 and 2023, driven, in part, by monetary and fiscal policies designed at combating continued inflationary pressures, caused a decline in the mortgage insurance market, which reduced our NIW for the year.
We expect this trend to continue into 2023 as rates remain elevated, but the ultimate impact on our premium and future NIW is difficult to predict. Declining interest rates historically increase the rate at which borrowers refinance their existing mortgages, thereby resulting in cancellations of the mortgage insurance covering existing loans.
We expect this trend to continue into early 2024 as rates remain elevated, but the ultimate impact on our premium and future NIW is difficult to predict. Declining interest rates historically increase the rate at which borrowers refinance their existing mortgages, thereby resulting in cancellations of the mortgage insurance covering existing loans.
Our insurance operations are subject to a wide variety of laws and regulations and are extensively regulated. State insurance laws regulate most aspects of our business, and our insurance subsidiaries are regulated by the insurance departments of the states in which they are domiciled and licensed.
Our insurance operations are subject to a wide variety of laws and regulations and are extensively regulated. State insurance laws regulate most aspects of our U.S. business, and our U.S. domiciled insurance subsidiaries are regulated by the insurance departments of the states in which they are domiciled and licensed.
Additionally, any downgrade or negative outlook of our Parent’s ratings may negatively impact our ratings by certain ratings agencies whose rating protocols and group rating methodologies require adverse ratings actions in cases of parent or sister company rating downgrades or adverse rating actions.
Additionally, any downgrade or negative outlook of Genworth’s ratings may negatively impact our ratings by certain ratings agencies whose rating protocols and group rating methodologies require adverse ratings actions in cases of parent or sister company rating downgrades or adverse rating actions.
Also, our Parent may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders.
Also, Genworth may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders.
See “—Our Parent’s continued ownership of at least 80% of our common stock may limit our ability to raise additional capital by issuing common stock to third parties”. Our Parent may cease to own such amount of stock in the future and in that event, we would cease to be a member of the Genworth Consolidated Group.
See “—Genworth’s continued ownership of at least 80% of our common stock may limit our ability to raise additional capital by issuing common stock to third parties”. Genworth may cease to own such amount of stock in the future and in that event, we would cease to be a member of the Genworth Consolidated Group.
See “Business—Underwriting.” Under this program, a customer could commit us to insure a material number of loans that would fail our pre-established guidelines for delegated underwriting but pass our model and certain gating criteria before we discover the problem and terminate that customer’s delegated underwriting authority.
Under this program, a customer could commit us to insure a material number of loans that would fail our pre-established guidelines for delegated underwriting but pass our model and certain gating criteria before we discover the problem and terminate that customer’s delegated underwriting authority.
Our Parent’s high ownership percentage risk may also impact our stock price as price volatility may be greater if the public float and trading volume of shares of our common stock are low.
Genworth’s high ownership percentage risk may also impact our stock price as price volatility may be greater if the public float and trading volume of shares of our common stock are low.
Given that our Parent expects to incur federal income tax deductions for the foreseeable future, our Parent may find it beneficial to retain at least 80% ownership of our common stock for the foreseeable future.
Given that Genworth expects to incur federal income tax deductions for the foreseeable future, Genworth may find it beneficial to retain at least 80% ownership of our common stock for the foreseeable future.
In addition, future dividend payments or other means of returning capital to our shareholders are also subject to approval by the Parent, compliance with the terms of our debt agreements and applicable laws and regulations. Our ability to repurchase stock may also be restricted 71 by our limited public float and relationship with our Parent.
In addition, future dividend payments or other means of returning capital to our shareholders are also subject to approval by Genworth, compliance with the terms of our debt agreements and applicable laws and regulations. Our ability to repurchase stock may also be restricted by our limited public float and relationship with Genworth.
Further, our relationships with our customers may be adversely affected by the ratings assigned to our Parent or its other operating subsidiaries, which may be impacted by factors such as any risk or perceived risk regarding our Parent’s liquidity and its (or its affiliates) ability to meet obligations as they become due, and which could have a material adverse effect on our business, results of operations and financial condition.
Further, our relationships with our customers may be adversely affected by the ratings assigned to Genworth or its other operating subsidiaries, which may be impacted by factors such as any risk or perceived risk regarding Genworth’s liquidity and its (or its affiliates) ability to meet obligations as they become due, and which could have a material adverse effect on our business, results of operations and financial condition.
In addition to the general regulatory risks that are described under “—Our business is extensively regulated and changes in regulation may reduce our profitability and limit our growth,” we are also affected by various additional regulations relating particularly to our mortgage insurance operations.
In addition to the general regulatory risks that are described under “—Our business is extensively regulated and changes in regulation may reduce our profitability and limit our growth,” we are also affected by various additional regulations, particularly those that relate to our mortgage insurance operations.
However, the occurrence of unforeseen events, such as COVID-19, or the occurrence of events of a greater magnitude than expected, including those arising from inadequate or ineffective controls, a failure in processes, procedures or systems implemented by us or a failure on the part of employees upon which we rely, may have a material adverse effect on our business, results of operations and financial condition.
However, the occurrence of unforeseen events, or the occurrence of events of a greater magnitude than expected, including those arising from inadequate or ineffective controls, a failure in processes, procedures or systems implemented by us or a failure on the part of employees upon which we rely, may have a material adverse effect on our business, results of operations and financial condition.
We face the risk of litigation and regulatory proceedings or other actions in the ordinary course of operating our business, including class action lawsuits. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships.
We face the risk of litigation and regulatory proceedings or other actions in the ordinary course of operating our business, including class action lawsuits. We may also be subject to litigation arising out of our general business activities such as our contractual and employment relationships.
In addition, certain of our officers negotiating these agreements may appear to have conflicts of interest as a result of their ownership of our Parent’s common stock and holdings of our Parent’s equity awards. The terms of our arrangements with our Parent may be more favorable than we will be able to obtain from an unaffiliated third party.
In addition, certain of our officers negotiating these agreements may appear to have conflicts of interest as a result of their ownership of Genworth’s common stock and holdings of Genworth’s equity awards. The terms of our arrangements with Genworth may be more favorable than we will be able to obtain from an unaffiliated third party.
In furtherance of Fannie Mae and Freddie Mac’s respective charter requirements, each GSE adopted PMIERs effective December 31, 2015. PMIERs has since been amended on several occasions, including as a result of COVID-19 (as amended, the “PMIERs Amendment”).
In furtherance of Fannie Mae and Freddie Mac’s respective charter requirements, each GSE adopted PMIERs effective December 31, 2015. PMIERs has since been amended on several occasions, including as a result of COVID-19.
In addition, in the event we were to cease being a member of the Genworth Consolidated Group, we and our Parent would be subject to the application of the “unified loss rules,” which may require us to pay more income tax in the future.
In the event we were to cease being a member of the Genworth Consolidated Group, we and Genworth would be subject to the application of the “unified loss rules,” which may require us to pay more income tax in the future.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−1 removed0 unchanged
See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on dividends. Item 6. [Reserved]
See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on dividends. Item 6. [Reserved] 66
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock Our common stock is listed on the Nasdaq Stock Market under the symbol “ACT.” As of February 24, 2023, we had 7 registered holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock Our common stock is listed on the Nasdaq Stock Market under the symbol “ACT.” As of February 26, 2024, we had 5 registered holders of record of our common stock.
We selected the members of this peer group because each is a competitor of ours in the private mortgage insurance industry.
We selected the members of this peer group because each is a competitor of ours in the private mortgage insurance industry with a relatively similar market capitalization.
Stock Performance Graph The graph below compares the cumulative total stockholder return of an investment in (i) our common shares, (ii) the Russell 2000 Index, (iii) the S&P 500 and (iv) a composite peer group consisting of Essent Group Ltd., MGIC Investment Corporation, NMI Holdings, Inc., and Radian Group Inc, for the period from September 16, 2021 (the date our common shares commenced trading on the Nasdaq Stock Market) through December 31, 2022.
Subsequent to year end, the Company purchased 133,307 shares at an average price of $27.75 per share through January 31, 2024. 65 Stock Performance Graph The graph below compares the cumulative total stockholder return of an investment in (i) our common shares, (ii) the Russell 2000 Index, (iii) the S&P 500 and (iv) a composite peer group consisting of Essent Group Ltd., MGIC Investment Corporation, NMI Holdings, Inc., and Radian Group Inc, for the period from September 16, 2021 (the date our common shares commenced trading on the Nasdaq Stock Market) through December 31, 2023.
Issuer Purchases of Equity Securities The table below sets forth information regarding repurchases of our common shares during the three months ended December 31, 2022: Period (Dollar amounts in thousands except per share amounts) Total Number of Shares Purchased Average Price Paid per Share Total 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) October 1 - October 31, 2022 0 $ — 0 $ — November 1 - November 30, 2022 40,073 $ 24.20 40,073 $ 74,030 December 1 - December 31, 2022 23,498 $ 23.94 23,498 $ 73,468 Total 63,571 $ 24.10 63,571 $ 73,468 (1) On November 1, 2022 the Company announced authorization to repurchase up to $75 million of its common shares.
Issuer Purchases of Equity Securities The table below sets forth information regarding repurchases of our common shares during the three months ended December 31, 2023: Period (Dollar amounts in thousands except per share amounts) Total Number of Shares Purchased Average Price Paid per Share Total 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) October 1 - October 31, 2023 294,876 $ 27.13 294,876 $ 95,860 November 1 - November 30, 2023 361,285 $ 27.69 361,285 $ 85,856 December 1 - December 31, 2023 0 $ — 0 $ — Total 656,161 $ 27.44 656,161 $ 85,856 _______________ (1) On November 1, 2022, the Company announced authorization to repurchase up to $75 million of its common shares.
For the December 2022 Annual Report, we removed Arch Capital Group Ltd. from our peer listing due to the more differentiated nature of their business and outsized market capitalization in relation to the remainder of the peer list. 73 September 16, 2021 December 31, 2021 December 31, 2022 Enact Holdings, Inc. $100.00 $106.61 $132.49 Russell 2000 $100.00 $100.56 $78.88 S&P 500 $100.00 $106.54 $85.82 Peer Group (Old) $100.00 $106.12 $127.29 Peer Group (New) $100.00 $98.97 $90.52 Dividends During the first quarter of 2022, we announced that our Board of Directors has approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend.
September 16, 2021 December 31, 2021 December 31, 2022 December 31, 2023 Enact Holdings, Inc. $100.00 $106.61 $132.49 $166.54 Russell 2000 $100.00 $100.56 $78.88 $90.78 S&P 500 $100.00 $106.54 $85.82 $106.62 Peer Group $100.00 $98.97 $90.52 $133.21 Dividends During the first quarter of 2022, we announced that our Board of Directors approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend.
The inaugural quarterly dividend of $0.14 per share was paid in the second quarter of 2022, followed by payments of regular dividends of $0.14 per share in the third and fourth quarters of 2022 as well. In the fourth quarter of 2022, we also paid a special cash dividend of $1.12 per share.
The inaugural quarterly dividend of $0.14 per share was paid in the second quarter of 2022, followed by payments of regular dividends of $0.14 per share in each quarter through the first quarter of 2023. In the second quarter of 2023, the regular dividend increased to $0.16 per share.
Removed
The authorization has no expiration date. Subsequent to year end, the Company purchased 253,689 shares at an average price of $24.13 through January 31, 2023.
Added
The authorization has no expiration date. In August 2023, we also announced a new share repurchase authorization which allows for the purchase of an additional $100 million of EHI common stock (also with no expiration date).
Added
In addition to our regular dividends, we paid special cash dividends of $0.71 per share during the fourth quarter of 2023 and $1.12 per share during the fourth quarter of 2022. In February of 2024, we announced our first quarter dividend of $0.16 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

156 edited+25 added−52 removed116 unchanged
In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies.
In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies.
Incurred losses depend to a significant extent on the following factors: • deterioration of regional or national economic conditions leading to a reduction in borrowers’ income and thus their ability to make mortgage payments; • legislative, regulatory, FHFA or GSE action, or executive orders permitting or mandating forbearance or a moratorium on foreclosures or evictions due to events such as natural disasters or COVID-19; • a drop in housing values that could expose us to greater loss on resale of properties obtained through foreclosure proceedings and an adverse change in the effectiveness of loss mitigation actions that could result in an increase in the frequency of expected claim rates; • a drop in housing values that negatively impacts a borrower’s willingness to continue mortgage payments, potentially leading to higher delinquencies and ultimately claims; • if the foreclosure occurs in a state that imposes judicial process, which generally increases the amount of time it takes for a foreclosure to be completed, which impacts severity of the claim; • the credit characteristics in our in-force portfolio, as loans with higher risk characteristics generally result in more delinquencies and claims; • the size of loans we insure, as loans with relatively higher average loan amounts generally result in higher incurred losses; • the coverage percentage on insured loans, as loans with higher percentages of insurance coverage generally correlate with higher incurred losses; • the level and amount of reinsurance coverage maintained with third parties; and • the distribution of claims over the life of a book.
Incurred losses depend to a significant extent on the following factors: • deterioration of regional or national economic conditions leading to a reduction in borrowers’ income and thus their ability to make mortgage payments; • legislative, regulatory, FHFA or GSE action, or executive orders permitting or mandating forbearance or a moratorium on foreclosures or evictions due to events such as natural disasters or COVID-19; • a drop in housing values that could expose us to greater loss on resale of properties obtained through foreclosure proceedings and an adverse change in the effectiveness of loss mitigation actions that could result in an increase in the frequency of expected claim rates; • a drop in housing values that negatively impacts a borrower’s willingness to continue mortgage payments, potentially leading to higher delinquencies and ultimately claims; • if the foreclosure occurs in a state that imposes judicial process, which generally increases the amount of time it takes for a foreclosure to be completed, which impacts severity of the claim; • the credit characteristics in our in-force portfolio, as loans with higher risk characteristics generally result in more delinquencies and claims; • the size of loans we insure, as loans with relatively higher average loan amounts generally result in higher incurred losses; • the coverage percentage on insured loans, as loans with higher percentages of insurance coverage generally correlate with higher incurred losses; 71 • the level and amount of reinsurance coverage maintained with third parties; and • the distribution of claims over the life of a book.
Significant external influences include changes in home prices, unemployment, government housing policies, state foreclosure timeline, general economic conditions, interest rates, tax policy, credit availability and mortgage products. Small changes in assumptions or small deviations of actual experience from 80 assumptions can have, and in the past have had, material impacts on our reserves, results of operations and financial condition.
Significant external influences include changes in home prices, unemployment, government housing policies, state foreclosure timeline, general economic conditions, interest rates, tax policy, credit availability and mortgage products. Small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our reserves, results of operations and financial condition.
We compete with other private mortgage insurers based on pricing, underwriting guidelines, customer relationships, service levels, policy terms, loss mitigation practices, perceived financial strength (including comparative credit ratings), reputation, strength of management, product features and technology ease-of-use. We also compete with governmental agencies (principally the FHA and the VA) primarily based on price and underwriting guidelines.
We compete with other private mortgage insurers based on pricing, underwriting guidelines, customer relationships, service levels, policy terms, loss mitigation practices, perceived financial strength (including 68 comparative credit ratings), reputation, strength of management, product features and technology ease-of-use. We also compete with governmental agencies (principally the FHA and the VA) primarily based on price and underwriting guidelines.
Cancellations of our insurance policies as a result of prepayments and other reductions of IIF, such as rescissions of coverage and claims paid, generally have a negative effect on premiums earned. 77 Persistency Rate and Business Mix The percentage of our IIF that remains insured after taking into account annualized cancellations for the period presented is defined as our persistency rate.
Cancellations of our insurance policies as a result of prepayments and other reductions of IIF, such as rescissions of coverage and claims paid, generally have a negative effect on premiums earned. Persistency Rate and Business Mix The percentage of our IIF that remains insured after taking into account annualized cancellations for the period presented is defined as our persistency rate.
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 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 102 subsidiaries are subject to regulatory and other capital restrictions with respect to the payment of dividends.
In the event of a borrower default, our coverage reduces and, in certain instances eliminates, losses to the insured by transferring the covered portion of the economic loss to us. Borrower defaults are first reported to us as new delinquencies when the borrower fails to make two consecutive monthly mortgage payments.
In the event of a borrower default, our coverage reduces and, in certain instances eliminates, losses to the 67 insured by transferring the covered portion of the economic loss to us. Borrower defaults are first reported to us as new delinquencies when the borrower fails to make two consecutive monthly mortgage payments.
Because these assumptions relate to factors that are not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments.
Because these assumptions relate to factors that are not known in advance, change over time, are difficult to accurately predict and are 72 inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments.
More recently, in response to FTHB 78 demand, there has been modest credit expansion that accommodates LTV over 95% and higher DTI ratios. Even after this expansion, private mortgage insurers and the GSEs have maintained strong credit standards well above historical norms.
More recently, in response to FTHB demand, there has been modest credit expansion that accommodates LTV over 95% and higher DTI ratios. Even after this expansion, private mortgage insurers and the GSEs have maintained strong credit standards well above historical norms.
For 109 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.
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.
Risk Factors.” We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances 74 occurring after the forward-looking statements or other statements were made.
Risk Factors.” We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made.
Given the regulatory focus on the 108 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.
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.
The model assesses the performance of new 76 business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility.
The model assesses the performance of new business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility.
Trends in 90 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.
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.
On October 24, 2022, the FHFA announced two initiatives : 1) t argeted 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 all three nationwide consumer reporting agencies and instead only require credit reports from two of the three nationwide credit reporting agencies.
On October 24, 2022, the FHFA announced two initiatives : 1) t argeted 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 all three nationwide consumer reporting agencies and instead only requiring credit reports from two of the three nationwide credit reporting agencies.
As a result, minimum policyholder surplus could be a limitation on the future dividends of our regulated operating subsidiaries. As mentioned above, another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs.
As a result, minimum policyholder surplus could be a limitation on the future dividends of our regulated operating subsidiaries. 100 As mentioned above, another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs.
We expect the timing and amount of any future share repurchases will be opportunistic and will depend on a variety of factors, including EHI’s share price, capital availability, business and market conditions, regulatory requirements, and debt covenant restrictions.
We expect the timing and amount of any 79 future share repurchases will be opportunistic and will depend on a variety of factors, including EHI’s share price, capital availability, business and market conditions, regulatory requirements, and debt covenant restrictions.
(2) Includes the District of Columbia. 100 The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2021: Percent of RIF Percent of direct primary case reserves Delinquency rate By state: California 11 % 12 % 3.17 % Texas 8 8 2.89 % Florida (1) 7 9 2.97 % New York (1) 5 12 3.80 % Illinois (1) 5 6 3.09 % Michigan 4 2 1.87 % Arizona 4 2 2.31 % North Carolina 3 2 2.18 % Pennsylvania (1) 3 3 2.38 % Washington 3 3 2.98 % All other states (2) 47 41 2.46 % Total 100 % 100 % 2.65 % ______________ (1) Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed.
The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2021: Percent of RIF Percent of direct primary case reserves Delinquency rate By state: California 11 % 12 % 3.17 % Texas 8 8 2.89 % Florida (1) 7 9 2.97 % New York (1) 5 12 3.80 % Illinois (1) 5 6 3.09 % Michigan 4 2 1.87 % Arizona 4 2 2.31 % North Carolina 3 2 2.18 % Pennsylvania (1) 3 3 2.38 % Washington 3 3 2.98 % All other states (2) 47 41 2.46 % Total 100 % 100 % 2.65 % ______________ (1) Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed.
Incurred losses are generally affected by macroeconomic conditions, borrower credit 75 quality, certain loan attributes, underwriting quality and our loss mitigation efforts among other factors detailed below.
Incurred losses are generally affected by macroeconomic conditions, borrower credit quality, certain loan attributes, underwriting quality and our loss mitigation efforts among other factors detailed below.
These deferred acquisition costs are referred to as “DAC.” The ongoing maintenance expenses of our insurance contracts are generally fixed in nature and include costs such as information technology, finance and legal, among others, including costs allocated from our Parent for certain activities on our behalf. See Note 11 to our consolidated financial statements regarding our related party transactions.
These deferred acquisition costs are referred to as “DAC.” The ongoing maintenance expenses of our insurance contracts are generally fixed in nature and include costs such as information technology, finance and legal, among others, including costs allocated from Genworth for certain activities on our behalf. See Note 11 to our consolidated financial statements regarding our related party transactions.
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.
In addition to the restrictions described above, all dividends from EHI are subject to Genworth 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.
The following table presents the weighted average mortgage interest rate on outstanding primary IIF as of December 31, 2022, excluding our run-off business. Prepayment speeds may be affected by changes in interest rates, among other factors. An increasing interest rate environment generally will reduce refinancing activity and result in lower prepayments.
The following table presents the weighted average mortgage interest rate on outstanding primary IIF as of December 31, 2023, excluding our run-off business. Prepayment speeds may be affected by changes in interest rates, among other factors. An increasing interest rate environment generally will reduce refinancing activity and result in lower prepayments.
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.
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. Our portfolio.
We also cannot predict the impact on our ratings or future ratings of actions taken with respect to our Parent. 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 Agency Rating Outlook Change Date of Rating Moody’s Investor Service, Inc.
We also cannot predict the impact on our ratings or future ratings of actions taken with respect to Genworth. 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 Agency Rating Outlook Change Date of Rating Moody’s Investor Service, Inc.
We also consider all available information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts, when developing the estimate of cash flows expected to be collected. There is no recorded allowance for credit losses on available-for-sale securities as of December 31, 2022.
We also consider all available information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts, when developing the estimate of cash flows expected to be collected. There is no recorded allowance for credit losses on available-for-sale securities as of December 31, 2023.
The table 99 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: California 12 % 10 % 2.09 % Texas 8 7 2.12 % Florida (1) 8 8 2.54 % New York (1) 5 13 2.95 % Illinois (1) 5 6 2.54 % Arizona 4 2 1.78 % Michigan 4 3 1.79 % North Carolina 3 3 1.59 % Georgia 3 3 2.23 % Washington 3 3 1.92 % All other states (2) 45 42 1.94 % Total 100 % 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. 92 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: California 12 % 10 % 2.09 % Texas 8 7 2.12 % Florida (1) 8 8 2.54 % New York (1) 5 13 2.95 % Illinois (1) 5 6 2.54 % Arizona 4 2 1.78 % Michigan 4 3 1.79 % North Carolina 3 3 1.59 % Georgia 3 3 2.23 % Washington 3 3 1.92 % All other states (2) 45 42 1.94 % Total 100 % 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.
Because our insurance premiums are earned over the life of a policy, higher or lower persistency rates can have a significant impact on our profitability. The rise of interest rates throughout 2022 has significantly increased persistency in the portfolio, but this impact is partially offset by lower NIW.
Because our insurance premiums are earned over the life of a policy, higher or lower persistency rates can have a significant impact on our profitability. The rise of interest rates throughout 2022 and 2023 has significantly increased persistency in the portfolio, but this impact is partially offset by lower NIW.
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.
This is in line with market trends as elevated 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.
Item 7. 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 audited consolidated financial statements and related notes for the years ended December 31, 2022, 2021 and 2020 included in Item 8 of this Annual Report.
Item 7. 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 audited consolidated financial statements and related notes for the years ended December 31, 2023, 2022 and 2021 included in Item 8 of this Annual Report.
Likewise, if primary persistency rates declined on our existing insurance in-force by 10%, earned premiums would decline by approximately $94 million during the first full year, partially offset by higher policy cancellations in our single premium products.
Likewise, if primary persistency rates declined on our existing insurance in-force by 10%, earned premiums would decline by approximately $96 million during the first full year, partially offset by higher policy cancellations in our single premium products.
We currently have no material financing commitments, such as drawn lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than the 2025 Senior Notes. Financial Strength Ratings Ratings with respect to the financial strength of operating subsidiaries are an important factor in establishing the competitive position of insurance companies.
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 Ratings with respect to the financial strength of operating subsidiaries are an important factor in establishing the competitive position of insurance companies.
We continue to hold reserves as of December 31, 2022, related to delinquencies from borrower forbearance programs due to COVID-19. We have seen COVID-19-related delinquencies cure above expectations, but reserves recorded related to borrower forbearance have a high degree of estimation.
We continue to hold reserves as of December 31, 2023, related to delinquencies from borrower forbearance programs due to COVID-19. We have seen COVID-19-related delinquencies cure above expectations, but reserves recorded related to borrower forbearance have a high degree of estimation.
The changes marked the third iteration of 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 changes marked the third iteration of the FHFA’s ongoing pricing review since early 2022 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.
Our net premiums earned (i.e., materially, the gross premiums charged less premiums ceded as part of our CRT program) represent the largest source of our revenues. Importantly, our CRT program helps to de-risk our operating model and spread the risk of loss across our counterparties while also providing capital relief.
Our net premiums earned (i.e., materially, the gross premiums charged less premiums ceded as part of our CRT program) represent the largest source of our revenues. Importantly, our CRT program helps to manage risk in our operating model and spread the risk of loss across our counterparties while also providing capital relief.
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. The largest portion of loss reserves has shifted to newer book years in line with changes in RIF.
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 have shifted to newer book years in line with changes in RIF.
For example, a decline in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately $3 million in the first full year.
For example, a decline in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately $4 million in the first full year.
We have no derivative financial instruments in our investment portfolio. As of December 31, 2022, December 31, 2021 and December 31, 2020, 98%, 97% and 98% of our investment portfolio was rated investment grade, respectively.
We have no derivative financial instruments in our investment portfolio. As of December 31, 2023, 2022 and 2021, 98%, 98% and 97% of our investment portfolio was rated investment grade, respectively.
For example, widening credit spreads will generally result in a decrease, while tightening of credit spreads will generally result in an increase, in the fair value of our fixed maturity securities. As well, during periods of increasing interest rates, the market values of lower-yielding assets will decline.
For example, widening credit spreads will generally result in a decrease, while tightening of credit spreads will generally result in an increase in the fair value of our fixed maturity securities. Also, during periods of increasing interest rates, the market values of lower-yielding assets will decline.
We also employ a CRT program to transfer a portion of our risk through both traditional XOL reinsurance arrangements and the issuance of ILNs. In exchange, we cede a negotiated amount of our premiums to the reinsurers and ILN investors that participate in our CRT transactions.
We also employ a CRT program to transfer a portion of our risk through traditional XOL and quota share reinsurance arrangements and the issuance of ILNs. In exchange, we cede a negotiated amount of our premiums to the reinsurers and ILN investors that participate in our CRT transactions.
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 FHA and the FHFA.
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 and the FHFA.
Pre-foreclosure sales, acquisitions and other early workout and claim administration actions help to reduce overall claim severity. Our average primary mortgage insurance claim severity was 94%, 103% and 106% for the years ended December 31, 2022, 2021 and 2020, respectively. The 2022 average claim severity was impacted by low claim volumes and lifetime home price appreciation.
Pre-foreclosure sales, acquisitions and other early workout and claim administration actions help to reduce overall claim severity. Our average primary mortgage insurance claim severity was 97%, 94% and 103% for the years ended December 31, 2023, 2022 and 2021, respectively. The 2023 average claim severity was impacted by low claim volumes and lifetime home price appreciation.
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 value to our Parent and its stockholders, among other objectives. 105 To achieve our portfolio objectives, our investment strategy focuses primarily on: • Our business outlook, current and expected future investment conditions; • Investments 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.
Our investment portfolio primarily consists of a diverse mix of highly rated fixed maturity 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. 97 To achieve our portfolio objectives, our investment strategy focuses primarily on: • Our business outlook, including current and expected future investment conditions; • Investments 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.
Refer to Note 2 in our audited consolidated financial statements for the years ended December 31, 2022, 2021 and 2020, for a discussion of recently adopted and not yet adopted accounting standards.
Refer to Note 2 in our audited consolidated financial statements for the years ended December 31, 2023, 2022 and 2021, for a discussion of recently adopted and not yet adopted accounting standards. 103
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.
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 impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.
Based on our estimated statutory results and in accordance with applicable dividend restrictions, our insurance subsidiaries have the capacity to pay dividends of $292 million from unassigned surplus as of December 31, 2022, with 30-day advance notice to the Commissioner of the intent to pay.
Based on our estimated statutory results and in accordance with applicable dividend restrictions, our insurance subsidiaries have the capacity to pay dividends of $336 million from unassigned surplus as of December 31, 2023, with 30-day advance notice to the Commissioner of the intent to pay.
The upfront fees are eliminated for certain first-time home buyers with income at or below area median income and certain other GSE affordable housing product s. The fee reductions went into effect in the fourth quarter of 2022 while the new fees on cash-out refinance loans began February 1, 2023.
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.
As of December 31, 2022 and 2021, single premium policies comprised 12% and 13% of primary IIF, respectively. Credit Quality Improved analytics, stronger loan origination quality controls and the regulatory implementation of the QM Rule have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time.
As of 70 December 31, 2023 and 2022, single premium policies comprised 10% and 12% of primary IIF, respectively. Credit Quality Improved analytics, stronger loan origination quality controls and the regulatory implementation of the QM Rule have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time.
Insurance in-force and Risk in-force IIF increased largely from NIW and increased persistency in the current year, partially offset by lapses and cancellations. Primary persistency rate was 80% and 62% for the years ended December 31, 2022 and 2021, respectively.
Insurance in-force and Risk in-force IIF increased largely from NIW and increased persistency in the current year, partially offset by lapses and cancellations. Primary persistency rate was 85% and 80% for the years ended December 31, 2023 and 2022, respectively.
Liquidity As of December 31, 2022, we maintained liquidity in the form of cash and cash equivalents of $514 million compared to $426 million as of December 31, 2021, and we also held significant levels of 110 investment-grade fixed maturity securities that can be monetized should our cash and cash equivalents be insufficient to meet our obligations.
Liquidity As of December 31, 2023, we maintained liquidity in the form of cash and cash equivalents of $616 million compared to $514 million as of December 31, 2022, and we also held significant levels of investment-grade fixed maturity securities that can be monetized should our cash and cash equivalents be insufficient to meet our obligations.
Based on the composition of our insurance portfolio, with monthly premium policies comprising a larger proportion of our total portfolio than single premium policies, an increase or decrease in IIF generally has a corresponding impact on premiums earned.
IIF is one of the primary drivers of our future earned premium. Based on the composition of our insurance portfolio, with monthly premium policies comprising a larger proportion of our total portfolio than single premium policies, an increase or decrease in IIF generally has a corresponding impact on premiums earned.
For example, based on our actual experience during the three-year period immediately preceding December 31, 2022, a change of 6 percentage points, or 15%, in the average claim rate would change the gross loss reserve amount for such quarter by approximately $80 million.
For example, based on our actual experience during the three-year period immediately preceding December 31, 2023, a change of 5 percentage points, or 15%, in the average claim rate would change the gross loss reserve amount for such quarter by approximately $75 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 December 31, 2022. The principal sources of liquidity in our business currently include insurance premiums, net investment income and cash flows from investment sales and maturities.
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 has remained undrawn through December 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.
Unearned premium was $203 million as of December 31, 2022, a decrease of $44 million compared to December 31, 2021. Changes in market conditions could cause a decline in mortgage originations, mortgage insurance penetration rates, persistency and our market share, all of which could impact new insurance written.
Unearned premium was $149 million as of December 31, 2023, a decrease of $53 million compared to December 31, 2022. Changes in market conditions could cause a decline in mortgage originations, mortgage insurance penetration rates, persistency and our market share, all of which could impact new insurance written.
The following table presents the security ratings of our fixed maturity securities as of the dates indicated: December 31, 2022 December 31, 2021 December 31, 2020 AAA 10 % 9 % 11 % AA 16 17 13 A 34 34 36 BBB 38 37 38 BB & below 2 3 2 Total 100 % 100 % 100 % 106 The table below presents the effective duration and investment yield on our investments available-for-sale, excluding cash and cash equivalents: December 31, 2022 December 31, 2021 December 31, 2020 Duration (in years) 3.6 3.9 3.4 Pre-tax yield (% of average investment portfolio assets) 3.1 % 2.7 % 2.8 % We manage credit risk by analyzing issuers, transaction structures and any associated collateral.
The following table presents the security ratings of our fixed maturity securities as of the dates indicated: December 31, 2023 December 31, 2022 December 31, 2021 AAA 10 % 10 % 9 % AA 20 16 17 A 33 34 34 BBB 35 38 37 BB & below 2 2 3 Total 100 % 100 % 100 % 98 The table below presents the effective duration and investment yield on our investments available-for-sale, excluding cash and cash equivalents: December 31, 2023 December 31, 2022 December 31, 2021 Duration (in years) 3.5 3.6 3.9 Pre-tax yield (% of average investment portfolio assets) 3.6 % 3.1 % 2.7 % We manage credit risk by analyzing issuers, transaction structures and any associated collateral.
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 and October of 2022, our primary mortgage insurance operating company, EMICO, completed distributions to EHI supporting our ability to pay cash dividends.
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 and November 2023, our primary mortgage insurance operating company, EMICO, completed distributions to EHI that supported our ability to pay dividends in 2023.
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.
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.
Likewise, a change of 6 percentage points, or a change of 5%, in the average severity rate would change the gross loss reserve amount for such quarter by approximately $26 million.
Likewise, a change of 4 percentage points, or a change of 4%, in the average severity rate would change the gross loss reserve amount for such quarter by approximately $19 million.
The plans are in their early stages, and 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 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.
Liquidity and Capital Resources Cash Flows The following table summarizes our consolidated cash flows for the years ended December 31: (Amounts in thousands) 2022 2021 2020 Net cash provided by (used in): Operating activities $ 560,510 $ 572,110 $ 704,350 Investing activities (220,255) (398,782) (1,136,912) Financing activities (252,308) (200,294) 300,298 Net increase (decrease) in cash and cash equivalents $ 87,947 $ (26,966) $ (132,264) 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.
Liquidity and Capital Resources Cash Flows The following table summarizes our consolidated cash flows for the years ended December 31: (Amounts in thousands) 2023 2022 2021 Net cash provided by (used in): Operating activities $ 632,038 $ 560,510 $ 572,110 Investing activities (229,404) (220,255) (398,782) Financing activities (300,726) (252,308) (200,294) Net increase (decrease) in cash and cash equivalents $ 101,908 $ 87,947 $ (26,966) 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.
There is currently no implementation deadline, 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 up-front fee structure and a recalibration and reformatting of their entire pricing matrix.
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 following table presents the calculation of our RTC ratio for our principal insurance company, EMICO, as of the dates indicated: (Dollar amounts in millions) December 31, 2022 December 31, 2021 December 31, 2020 Statutory policyholders’ surplus $ 1,084 $ 1,346 $ 1,475 Contingency reserves 3,548 3,041 2,518 Combined statutory capital $ 4,632 $ 4,387 $ 3,993 Adjusted RIF (1) $ 59,663 $ 54,033 $ 49,021 EMICO risk-to-capital ratio 12.9 12.3 12.3 ______________ (1) Adjusted RIF for purposes of calculating EMICO statutory RTC differs from RIF presented elsewhere herein.
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) December 31, 2023 December 31, 2022 December 31, 2021 Statutory policyholders’ surplus $ 1,026 $ 1,084 $ 1,346 Contingency reserves 3,953 3,548 3,041 Combined statutory capital $ 4,979 $ 4,632 $ 4,387 Adjusted RIF (1) $ 57,788 $ 59,663 $ 54,033 EMICO risk-to-capital ratio 11.6 12.9 12.3 ______________ (1) Adjusted RIF for purposes of calculating EMICO statutory RTC differs from RIF presented elsewhere herein.
The following table presents the calculation of our RTC ratio for our combined insurance subsidiaries as of the dates indicated: (Dollar amounts in millions) December 31, 2022 December 31, 2021 December 31, 2020 Statutory policyholders’ surplus $ 1,136 $ 1,397 $ 1,555 Contingency reserves 3,551 3,042 2,518 Combined statutory capital $ 4,687 $ 4,439 $ 4,073 Adjusted RIF (1) $ 60,061 $ 54,201 $ 49,104 Combined risk-to-capital ratio 12.8 12.2 12.1 ______________ (1) Adjusted RIF for purposes of calculating combined statutory RTC differs from RIF presented elsewhere herein.
The following table presents the calculation of our RTC ratio for our combined insurance subsidiaries as of the dates indicated: (Dollar amounts in millions) December 31, 2023 December 31, 2022 December 31, 2021 Statutory policyholders’ surplus $ 1,085 $ 1,136 $ 1,397 Contingency reserves 3,960 3,551 3,042 Combined statutory capital $ 5,045 $ 4,687 $ 4,439 Adjusted RIF (1) $ 58,277 $ 60,061 $ 54,201 Combined risk-to-capital ratio 11.6 12.8 12.2 ______________ (1) Adjusted RIF for purposes of calculating combined statutory RTC differs from RIF presented elsewhere herein.
(2) Includes the District of Columbia . 101 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 December 31, 2022: Percent of RIF Percent of direct primary case reserves Delinquency rate By MSA or MD: Chicago-Naperville, IL MD 3 % 5 % 2.84 % Phoenix, AZ MSA 3 2 1.83 % New York, NY MD 3 8 3.75 % Atlanta, GA MSA 2 3 2.42 % Washington-Arlington, DC MD 2 2 1.85 % Houston, TX MSA 2 3 2.60 % Riverside-San Bernardino CA MSA 2 2 2.89 % Los Angeles-Long Beach, CA MD 2 2 2.18 % Dallas, TX MD 2 1 1.86 % Denver-Aurora-Lakewood, CO MSA 2 1 1.12 % All other MSAs/MDs 77 71 2.00 % Total 100 % 100 % 2.08 % The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2021: Percent of RIF Percent of direct primary case reserves Delinquency rate By MSA or MD: Chicago-Naperville, IL MD 3 % 4 % 3.68 % Phoenix, AZ MSA 3 2 2.36 % New York, NY MD 3 8 5.32 % Atlanta, GA MSA 2 3 3.28 % Washington-Arlington, DC MD 2 2 2.96 % Houston, TX MSA 2 3 3.61 % Riverside-San Bernardino, CA MSA 2 2 3.42 % Los Angeles-Long Beach, CA MD 2 3 3.95 % Dallas, TX MD 2 2 2.31 % Nassau County, NY MD 2 4 5.55 % All other MSAs/MDs 77 67 2.44 % Total 100 % 100 % 2.65 % 102 The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2020: Percent of RIF Percent of direct primary case reserves Delinquency rate By MSA or MD: Chicago-Naperville, IL MD 3 % 4 % 6.36 % Phoenix, AZ MSA 3 2 4.63 % New York, NY MD 3 8 10.25 % Atlanta, GA MSA 2 3 6.68 % Washington-Arlington, DC MD 2 2 6.09 % Houston, TX MSA 2 3 7.59 % Riverside-San Bernardino, CA MSA 2 2 7.08 % Los Angeles-Long Beach, CA MD 2 2 7.57 % Dallas, TX MD 2 2 5.10 % Seattle-Bellevue, WA MD 2 2 6.33 % All other MSAs/MDs 77 70 4.43 % Total 100 % 100 % 4.86 % The number of delinquencies often does not correlate directly with the number of claims received because delinquencies may cure.
(2) Includes the District of Columbia . 93 The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2023: Percent of RIF Percent of direct primary case reserves Delinquency rate By MSA or MD: Phoenix, AZ MSA 3 % 2 % 2.01 % Chicago-Naperville, IL MD 3 4 2.88 % Atlanta, GA MSA 3 3 2.40 % New York, NY MD 2 7 3.60 % Washington-Arlington, DC MD 2 2 2.01 % Houston, TX MSA 2 3 2.67 % Los Angeles-Long Beach, CA MD 2 2 2.39 % Dallas, TX MD 2 2 1.92 % Riverside-San Bernardino, CA MSA 2 3 2.83 % Denver-Aurora-Lakewood, CO MSA 2 1 1.12 % All Other MSAs/MDs 77 71 2.01 % Total 100 % 100 % 2.10 % 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 3 % 5 % 2.84 % Phoenix, AZ MSA 3 2 1.83 % New York, NY MD 3 8 3.75 % Atlanta, GA MSA 2 3 2.42 % Washington-Arlington, DC MD 2 2 1.85 % Houston, TX MSA 2 3 2.60 % Riverside-San Bernardino, CA MSA 2 2 2.89 % Los Angeles-Long Beach, CA MD 2 2 2.18 % Dallas, TX MD 2 1 1.86 % Denver-Aurora-Lakewood, CO MSA 2 1 1.12 % All Other MSAs/MDs 77 71 2.00 % Total 100 % 100 % 2.08 % 94 The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2021: Percent of RIF Percent of direct primary case reserves Delinquency rate By MSA or MD: Chicago-Naperville, IL MD 3 % 4 % 3.68 % Phoenix, AZ MSA 3 2 2.36 % New York, NY MD 3 8 5.32 % Atlanta, GA MSA 2 3 3.28 % Washington-Arlington, DC MD 2 2 2.96 % Houston, TX MSA 2 3 3.61 % Riverside-San Bernardino, CA MSA 2 2 3.42 % Los Angeles-Long Beach, CA MD 2 3 3.95 % Dallas, TX MD 2 2 2.31 % Nassau County, NY MD 2 4 5.55 % All Other MSAs/MDs 77 67 2.44 % Total 100 % 100 % 2.65 % The number of delinquencies often does not correlate directly with the number of claims received because delinquencies may cure.
As of December 31, 2022, we had estimated available assets of $5,206 million against $3,156 million net required assets under PMIERs compared to available assets of $5,077 million against $3,074 million net required assets as of December 31, 2021.
As of December 31, 2023, we had estimated available assets of $5,006 million against $3,119 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.
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.
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, 76 pricing competitiveness relative to our peers and our selective participation in forward commitment transactions.
The metrics provided in this section exclude activity related to our run-off business, which is immaterial to our consolidated results of operations.
The metrics provided in this section are on a direct basis and exclude activity related to our run-off business, which is immaterial to our consolidated results of operations.
Therefore, we typically experience lower levels of losses resulting from favorable delinquency activity in the first and second quarters, as typically compared to the third and fourth quarters. As a result of delinquencies from COVID-19 and subsequent cure activity, trends from the last two years may not follow traditional seasonality.
Therefore, we typically experience lower levels of losses resulting from favorable delinquency activity in the first and second quarters, as typically compared to the third and fourth quarters. As a result of delinquencies from COVID-19 and subsequent cure activity, including the impact of forbearance policies on delinquency recognition and performance recent trends may not follow traditional seasonality.
(2) Expense ratio is calculated by dividing acquisition and operating expenses, net of deferrals, plus amortization of DAC and intangibles by net earned premiums.
(2) Expense ratio is calculated by dividing acquisition and operating expenses, net of deferrals, plus amortization of DAC and intangibles by net earned premiums. (3) Net earned premium rate is calculated by dividing earned premium by average primary IIF.
The following table includes a reconciliation of net income to adjusted operating income for the years ended December 31: (Amounts in thousands) 2022 2021 2020 Net income $ 704,157 $ 546,685 $ 370,421 Adjustments to net income: Net investment (gains) losses 2,036 2,124 3,324 Costs associated with reorganization 3,461 2,744 — Taxes on adjustments (1,155) (1,022) (698) Adjusted operating income $ 708,499 $ 550,531 $ 373,047 We recorded a pre-tax expense of $3.5 million for the year ended December 31, 2022, related to restructuring costs as we evaluate and appropriately size our organizational needs and expenses.
The following table includes a reconciliation of net income to adjusted operating income for the years ended December 31: (Amounts in thousands) 2023 2022 2021 Net income $ 665,511 $ 704,157 $ 546,685 Adjustments to net income: Net investment (gains) losses 14,022 2,036 2,124 Costs associated with reorganization (131) 3,461 2,744 Taxes on adjustments (2,917) (1,155) (1,022) Adjusted operating income $ 676,485 $ 708,499 $ 550,531 82 We recorded a pre-tax expense of $3.5 million for the year ended December 31, 2022, related to restructuring costs as we evaluated and appropriately sized our organizational needs and expenses.
Detailed discussions of our consolidated results of operations for the year ended December 31, 2020, including the year-over-year comparisons between 2021 and 2020, that are not included in this Annual Report on Form 10-K can be found in Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.
Detailed discussions of our consolidated results of operations for the year ended December 31, 2021, including the year-over-year comparisons between 2022 and 2021, that are not included in this Annual Report on Form 10-K can be found in Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023. 80 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues Premiums increased mainly attributable to higher average IIF.
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: December 31, 2022 December 31, 2021 December 31, 2020 (Amounts in thousands) Fair value % of total Fair value % of total Fair value % of total U.S. government, agencies and GSEs $ 44,769 0.9 % $ 58,408 1.1 % $ 138,224 2.7 % State and political subdivisions 419,856 8.6 538,453 10.2 187,377 3.7 Non-U.S. government 9,349 0.2 22,416 0.4 31,031 0.6 U.S. corporate 2,646,863 54.2 2,945,303 55.9 2,888,625 57.3 Non-U.S. corporate 652,844 13.4 666,594 12.7 607,669 12.0 Residential mortgage-backed 11,043 0.2 — — — — Other asset-backed 1,100,036 22.5 1,035,165 19.7 1,193,670 23.7 Total available-for-sale fixed maturity securities $ 4,884,760 100.0 % $ 5,266,339 100.0 % $ 5,046,596 100.0 % Our investment portfolio did not include any direct residential real estate or whole mortgage loans as of December 31, 2022 or December 31, 2021 and December 31, 2020.
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: December 31, 2023 December 31, 2022 December 31, 2021 (Amounts in thousands) Fair value % of total Fair value % of total Fair value % of total U.S. government, agencies and GSEs $ 195,129 3.7 % $ 44,769 0.9 % $ 58,408 1.1 % State and political subdivisions 438,214 8.3 419,856 8.6 538,453 10.2 Non-U.S. government 11,467 0.2 9,349 0.2 22,416 0.4 U.S. corporate 2,723,730 51.8 2,646,863 54.2 2,945,303 55.9 Non-U.S. corporate 689,663 13.1 652,844 13.4 666,594 12.7 Residential mortgage-backed 10,755 0.2 11,043 0.2 — — Other asset-backed 1,197,183 22.7 1,100,036 22.5 1,035,165 19.7 Total available-for-sale fixed maturity securities $ 5,266,141 100.0 % $ 4,884,760 100.0 % $ 5,266,339 100.0 % Our investment portfolio did not include any direct residential real estate or whole mortgage loans as of December 31, 2023, December 31, 2022 or December 31, 2021.
In most cases, delinquencies that are not cured result in a claim under our policy. 97 The following table shows a roll forward of the number of primary loans in default for the years ended December 31: (Loan count) 2022 2021 2020 Number of delinquencies, beginning of period 24,820 44,904 16,392 New defaults 35,996 32,624 85,074 Cures (40,278) (51,626) (55,396) Claims paid (574) (1,050) (1,148) Rescissions and claim denials (21) (32) (18) Number of delinquencies, end of period 19,943 24,820 44,904 The following table sets forth changes in our direct primary case loss reserves for the years ended December 31: (Amounts in thousands) (1) 2022 2021 2020 Loss reserves, beginning of period $ 606,102 $ 516,863 $ 204,749 Claims paid (28,123) (32,816) (52,389) Increase in reserves (98,636) 122,055 364,503 Loss reserves, end of period $ 479,343 $ 606,102 $ 516,863 ______________ (1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves.
In most cases, delinquencies that are not cured result in a claim under our policy. 89 The following table shows a roll forward of the number of primary loans in default for the years ended December 31: (Loan count) 2023 2022 2021 Number of delinquencies, beginning of period 19,943 24,820 44,904 New defaults 41,617 35,996 32,624 Cures (40,475) (40,278) (51,626) Claims paid (615) (574) (1,050) Rescissions and claim denials (38) (21) (32) Number of delinquencies, end of period 20,432 19,943 24,820 The following table sets forth changes in our direct primary case loss reserves for the years ended December 31: (Amounts in thousands) (1) 2023 2022 2021 Loss reserves, beginning of period $ 479,343 $ 606,102 $ 516,863 Claims paid (23,357) (28,123) (32,816) Increase in reserves 20,723 (98,636) 122,055 Loss reserves, end of period $ 476,709 $ 479,343 $ 606,102 ______________ (1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves.
The following table shows incurred losses related to current and prior accident years for the years ended December 31: (Amounts in thousands) 2022 2021 2020 Losses and LAE incurred related to current accident year $ 219,461 $ 141,225 $ 364,548 Losses and LAE incurred related to prior accident years (313,652) (15,822) 16,202 Total incurred (1) $ (94,191) $ 125,403 $ 380,750 _______________ (1) Excludes run-off business.
The following table shows incurred losses related to current and prior accident years for the years ended December 31: (Amounts in thousands) 2023 2022 2021 Losses and LAE incurred related to current accident year $ 275,418 $ 219,461 $ 141,225 Losses and LAE incurred related to prior accident years (248,214) (313,652) (15,822) Total incurred (1) $ 27,204 $ (94,191) $ 125,403 _______________ (1) Excludes run-off business.
The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2021: Percent of RIF Percent of direct primary case reserves Delinquency rate Cumulative delinquency rate (1) Policy year: 2008 and prior 3 % 24 % 10.54 % 5.59 % 2009 to 2013 1 2 5.54 % 0.74 % 2014 1 3 5.51 % 0.99 % 2015 2 5 4.24 % 1.04 % 2016 4 8 3.69 % 1.16 % 2017 4 10 4.78 % 1.56 % 2018 4 13 5.93 % 1.88 % 2019 10 19 3.89 % 1.68 % 2020 31 14 1.50 % 1.14 % 2021 40 2 0.37 % 0.36 % Total portfolio 100 % 100 % 2.65 % 4.42 % ______________ (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. 104 The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2020: Percent of RIF Percent of direct primary case reserves Delinquency rate Cumulative delinquency rate (1) Policy year: 2008 and prior 5 % 28 % 13.68 % 5.66 % 2009 to 2013 2 2 5.44 % 0.91 % 2014 2 3 6.06 % 1.57 % 2015 4 5 5.66 % 1.97 % 2016 8 9 5.46 % 2.49 % 2017 8 12 6.51 % 3.34 % 2018 8 14 7.70 % 4.01 % 2019 19 19 5.60 % 3.93 % 2020 44 8 1.09 % 1.04 % Total portfolio 100 % 100 % 4.86 % 4.86 % ______________ (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 3 % 26 % 9.61 % 5.57 % 2009-2014 1 4 5.01 % 0.69 % 2015 1 3 3.61 % 0.71 % 2016 3 6 3.17 % 0.81 % 2017 3 7 3.78 % 1.01 % 2018 3 9 4.63 % 1.18 % 2019 7 11 2.71 % 0.93 % 2020 22 17 1.47 % 0.92 % 2021 32 14 1.20 % 1.06 % 2022 25 3 0.54 % 0.52 % Total portfolio 100 % 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. 96 The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2021: Percent of RIF Percent of direct primary case reserves Delinquency rate Cumulative delinquency rate (1) Policy year: 2008 and prior 3 % 24 % 10.54 % 5.59 % 2009-2013 1 2 5.54 % 0.74 % 2014 1 3 5.51 % 0.99 % 2015 2 5 4.24 % 1.04 % 2016 4 8 3.69 % 1.16 % 2017 4 10 4.78 % 1.56 % 2018 4 13 5.93 % 1.88 % 2019 10 19 3.89 % 1.68 % 2020 31 14 1.50 % 1.14 % 2021 40 2 0.37 % 0.36 % Total portfolio 100 % 100 % 2.65 % 4.42 % ______________ (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 selected operating performance measures on a primary basis as of or for the years ended December 31: (Dollar amounts in millions) 2022 2021 2020 New insurance written $ 66,485 $ 97,004 $ 99,871 Primary insurance in-force (1) $ 248,262 $ 226,514 $ 207,947 Primary risk in-force $ 62,791 $ 56,881 $ 52,475 Persistency rate 80 % 62 % 59 % Policies in-force (count) 960,306 937,350 924,624 Delinquent loans (count) 19,943 24,820 44,904 Delinquency rate 2.08 % 2.65 % 4.86 % _______________ (1) Represents the aggregate unpaid principal balance for loans we insure.
The following table sets forth selected operating performance measures on a primary basis as of or for the years ended December 31: (Dollar amounts in millions) 2023 2022 2021 New insurance written $53,081 $66,485 $97,004 Primary insurance in-force (1) $262,937 $248,262 $226,514 Primary risk in-force $67,529 $62,791 $56,881 Persistency rate 85 % 80 % 62 % Primary policies in-force (count) 974,516 960,306 937,350 Delinquent loans (count) 20,432 19,943 24,820 Delinquency rate 2.10 % 2.08 % 2.65 % _______________ (1) Represents the aggregate unpaid principal balance for loans we insure.
The Facility remains undrawn as of December 31, 2022. 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 May, September and December of 2022.
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, subject to approval by our Board of Directors each quarter. We paid quarterly dividends of $0.14 per share in March of 2023 and May, September and December of 2022.
The following tables set forth primary delinquencies, direct case reserves and RIF by aged missed payment status as of the dates indicated: December 31, 2022 (Dollar amounts in millions) Delinquencies Direct case reserves (1) Risk in-force Reserves as % of risk in-force Payments in default: 3 payments or less 8,920 $ 69 $ 509 14 % 4 - 11 payments 6,466 166 390 43 % 12 payments or more 4,557 244 248 98 % Total 19,943 $ 479 $ 1,147 42 % December 31, 2021 (Dollar amounts in millions) Delinquencies Direct case reserves (1) Risk in-force Reserves as % of risk in-force Payments in default: 3 payments or less 6,586 $ 35 $ 340 10 % 4 - 11 payments 7,360 111 426 26 % 12 payments or more 10,874 460 643 72 % Total 24,820 $ 606 $ 1,409 43 % ______________ (1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves. 98 December 31, 2020 (Dollar amounts in millions) Delinquencies Direct case reserves (1) Risk in-force Reserves as % of risk in-force Payments in default: 3 payments or less 10,484 $ 43 $ 549 8 % 4 - 11 payments 30,324 331 1,853 18 % 12 payments or more 4,096 143 204 70 % Total 44,904 $ 517 $ 2,606 20 % ______________ (1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves.
The following tables set forth primary delinquencies, direct primary case reserves and RIF by aged missed payment status as of the dates indicated: December 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 less 10,166 $ 88 $ 629 14 % 4 - 11 payments 6,934 205 469 44 % 12 payments or more 3,332 184 200 92 % Total 20,432 $ 477 $ 1,298 37 % 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 less 8,920 $ 69 $ 509 14 % 4 - 11 payments 6,466 166 390 43 % 12 payments or more 4,557 244 248 98 % Total 19,943 $ 479 $ 1,147 42 % ______________ (1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves. 90 December 31, 2021 (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 less 6,586 $ 35 $ 340 10 % 4 - 11 payments 7,360 111 426 26 % 12 payments or more 10,874 460 643 72 % Total 24,820 $ 606 $ 1,409 43 % ______________ (1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves.
In support, we have entered into an agreement with Genworth Holdings, Inc. to repurchase its EHI shares on a pro rata basis as part of the program. The share repurchase program is not expected to change Genworth’s ownership interest in EHI post-completion. We began repurchases in the fourth quarter of 2022 which were immaterial.
In conjunction with this authorization, we have entered into an agreement with Genworth Holdings, Inc. to repurchase its EHI shares on a pro rata basis as part of the program. The share repurchase program is not expected to change Genworth’s ownership interest in Enact post-completion.
As of December 31, 2022, the number of unemployed Americans stands at approximately 5.7 million and the number of long term unemployed over 26 weeks was approximately 1.1 million. Both metrics remain relatively in line with February 2020 levels.
The unemployment rate was 3.7% as of December 2023 compared to 3.5% in December 2022. As of December 31, 2023, the number of unemployed Americans stands at approximately 6.3 million and the number of long term unemployed over 26 weeks was approximately 1.2 million. Both metrics remain relatively in line with February 2020 levels. Forbearance and loss mitigation programs.
The following table sets forth primary IIF by DTI score at origination as of the dates indicated: (Amounts in millions) December 31, 2022 December 31, 2021 December 31, 2020 45.01% and above $ 43,831 18 % $ 34,076 15 % $ 31,047 15 % 38.01% to 45.00% 87,816 35 79,147 35 73,555 35 38.00% and below 116,615 47 113,291 50 103,345 50 Total $ 248,262 100 % $ 226,514 100 % $ 207,947 100 % The following table sets forth primary RIF by DTI score at origination as of the dates indicated: (Amounts in millions) December 31, 2022 December 31, 2021 December 31, 2020 45.01% and above $ 11,176 18 % $ 8,631 15 % $ 7,855 15 % 38.01% to 45.00% 22,268 35 19,974 35 18,647 36 38.00% and below 29,347 47 28,276 50 25,973 49 Total $ 62,791 100 % $ 56,881 100 % $ 52,475 100 % Delinquent loans and claims Our delinquency management process begins with notification by the loan servicer of a delinquency on an insured loan.
The following table sets forth primary IIF by DTI score at origination as of the dates indicated: (Amounts in millions) December 31, 2023 December 31, 2022 December 31, 2021 45.01% and above $ 53,440 20 % $ 43,831 18 % $ 34,076 15 % 38.01% to 45.00% 93,871 36 87,816 35 79,147 35 38.00% and below 115,626 44 116,615 47 113,291 50 Total $ 262,937 100 % $ 248,262 100 % $ 226,514 100 % The following table sets forth primary RIF by DTI score at origination as of the dates indicated: (Amounts in millions) December 31, 2023 December 31, 2022 December 31, 2021 45.01% and above $ 13,830 20 % $ 11,176 18 % $ 8,631 15 % 38.01% to 45.00% 24,072 36 22,268 35 19,974 35 38.00% and below 29,627 44 29,347 47 28,276 50 Total $ 67,529 100 % $ 62,791 100 % $ 56,881 100 % Delinquent loans and claims Our delinquency management process begins with notification by the loan servicer of a delinquency on an insured loan.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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. 112 • Prepayment 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 .
At December 31, 2022, 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. 113
As of December 31, 2023, the effective duration of our investments available-for-sale was 3.5 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 3.5% in fair value of our investments available-for-sale. 104

Other ACT 10-K year-over-year comparisons