Hello, and welcome to Enact's Third Quarter 2025 Earnings Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your first speaker, Daniel Kohl, Vice President of Investor Relations. You may begin.

Thank you, and good morning. Welcome to our third quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer; and Dean Mitchell, Chief Financial Officer and Treasurer. Rohit will provide an overview of our business performance and progress against our strategy. Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks. We will then take your questions. The earnings materials we issued after market close yesterday contain our financial results for the quarter, along with a comprehensive set of financial and operational metrics. These are available on the Investor Relations section of our website. Today's call is being recorded and will include the use of forward-looking statements. These statements are based on current assumptions, estimates, expectations and projections as of today's date. Additionally, they are subject to risks and uncertainties, which may cause actual results to be materially different and we undertake no obligation to update or revise such statements as a result of new information. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release as well as in our filings with the SEC, which will be available on our website. Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures. Reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation and our upcoming SEC filing on our website. With that, I'll turn the call over to Rohit.

Thank you, Daniel. Good morning, everyone. I am pleased to report that Enact delivered another strong quarter of performance, reflecting the continued disciplined execution of our strategy and the strength of our operating model. Our results demonstrate the strength of our business and our ongoing commitment to creating long-term value for our shareholders. To that end, we are pleased to announce our updated 2025 capital return expectation of approximately $500 million, up from prior guidance of $400 million. Additionally, we entered a new $435 million revolving credit facility with favorable terms, providing additional financial flexibility with which to manage our business and execute our strategy. Dean will discuss both in more detail. For the third quarter, we reported adjusted operating income of $166 million or $1.12 per diluted share. Additionally, adjusted return on equity was 13%, while insurance in-force increased 2% year-over-year to $272 billion, and we generated robust new insurance written of over $14 billion. We continue to navigate a dynamic macroeconomic environment with discipline and focus. The U.S. economy continues to be supported by steady consumer spending, moderating inflation and a resilient labor market even as hiring momentum cools. On a national level, steady wage growth, lower mortgage rate and generally stable home prices have driven modest improvements to affordability. However, given broader macro uncertainties, consumers are more cautious and many buyers are still waiting for the right conditions, leading to an increase in housing supply in certain geographies. Overall, our business remains underpinned by strong demographic tailwinds, particularly from prospective first-time homebuyers entering the market. We remain optimistic about the long-term health of the U.S. housing market and confident in our ability to deliver through economic cycles. Against this backdrop, our capital position and credit performance remain key strengths. During the quarter, we executed against our CRT…

Thanks, Rohit. Good morning, everyone. Adjusted operating income was $166 million or $1.12 per diluted share compared to $1.16 per diluted share in the same period last year, and $1.15 per diluted share in the second quarter of 2025. Adjusted operating return on equity was 13%. A detailed reconciliation of GAAP net income to adjusted operating income can be found in our earnings release. Turning to revenue drivers. New insurance written was $14 billion, up 6% sequentially and up 3% year-over-year. Persistency was 83% in the third quarter, up 1 point sequentially and flat year-over-year, continuing its trend above historical norms. While mortgage rates have fallen recently, our portfolio remains resilient with 21% of mortgages having rates at least 50 basis points above September's average of 6.4%. Historically, persistency has varied in relation to mortgage rates. As rates continue to change, we may see persistency shift from its current level. The combination of solid new insurance written and elevated persistency drove primary insurance in-force of $272 billion in the third quarter, up $2 billion or approximately 1% from the second quarter of 2025 and $4 billion or approximately 2% year-over-year. Total net premiums earned were $245 million, flat sequentially and down modestly year-over-year. The year-over-year decrease was primarily driven by higher ceded premiums. Our base premium rate of 39.7 basis points was down 0.1 basis point sequentially, aligned with our expectation for base premium rate in 2025 to approximate 2024 levels. As a reminder, our base premium rate is impacted by several factors and tends to modestly fluctuate from quarter-to-quarter. Our net earned premium rate was 34.9 basis points, down slightly sequentially, driven by higher ceded premiums. Investment income in the third quarter was $69 million, up $3 million or 4% sequentially and up $8 million or 12% year-over-year. Our…

Thanks, Dean. Looking ahead, while the external environment remains dynamic, our strong balance sheet, embedded equity and disciplined operating approach positions us well to navigate uncertainty and capitalize on long-term opportunities. I want to thank our entire team for their continued dedication and exceptional execution. Their commitment to our mission of helping people responsibly achieve the dream of homeownership is what drives our success. We continue to remain focused on delivering long-term value for all of our stakeholders, and we are confident in our ability to continue building on our strong history of consistent performance. Operator, we are now ready for Q&A.

[Operator Instructions] The first question comes from Bose George with KBW.

I first wanted to just ask about the expectation for delinquency trends. Can you talk about where you think delinquencies will peak on portfolios as they're fully seasoned? Can we look at books that are closer to being fully seasoned like maybe 2021 or as a way to gauge where the newer books will season?

Yes, Bose, thanks for the question. From a credit perspective, very much in line with what we said in our prepared remarks, credit performance remains very strong through the third quarter. It's certainly supported by a lot of different factors, kind of chief among them, the resilient macroeconomic environment, coupled with the embedded home price appreciation across our portfolio. I think from a vintage perspective, getting to that part of your question, we -- as we disaggregate the portfolio, we really don't see any variance to expectations across variables across the portfolio, and that includes book years. Obviously, there's book years with different mixes of risk variables. More recently, the 2022 and forward book years have a higher concentration to a purchase origination market, which tends to have higher concentration in high LTV, high DTIs. But when you consider those risk attributes mix, we really see good alignment between our actual performance and our expectations when we onboard that business from the onset. So I think certainly, credit performance is going to be very dependent on the macroeconomic environment. And if we continue to see the resiliency that we've seen to date, we would expect credit performance to stay in that very -- aligned with the very strong credit performance that we've seen to date.

Okay. Great. And is the typical seasoning sort of 4 years, 5 years? Is that when they're fully seasoned?

Yes. From an aging of the of the overall portfolio, we've talked about the normal loss development curve and the progression up that curve towards a plateau at around years 3 to 4. It's not a point. It's kind of a plateauing and that plateau happens in between years 3 and 4 and maybe another 12 months thereafter. What we've seen, what we talked about our expectation heading into 2025 was given the aging of that portfolio up in that 3- to 4-year time period that we would see some slowing in the delinquency development from a year-over-year change perspective. And I think that's actually what we've seen. So when you look back '23 to '24, you saw kind of mid-teens percentage change in increase in new delinquencies. This year, you see more kind of mid-single digits, 5%, 6% change year-over-year. And I think that has a lot to do with the aging of the portfolio and the development or the progression of the normal loss development curve.

Okay, great. And then just actually one clarification on the expense. The year-over-year increase, obviously, is very modest, but just in terms of the quarterly trends, the last couple of quarters, I guess, were a little lighter than '24. So this year, I guess, is the 4Q just a little more back-end heavy versus the other quarters?

Yes, Bose, we've talked about this in the past that our expenses aren't level throughout a calendar year. We typically have higher variable performance-based incentive comp over the last -- second half of the year. I think that's going to have a more meaningful impact in the last quarter of this year. But if you look back at prior year experience as well, you see that in the third and fourth quarters of just going back to like 2024. So yes, similar driver and a little bit more disproportionate in the fourth quarter of this year.

[Operator Instructions] The next question comes from Rick Shane with JPMorgan.

Really a couple of things. One, you've provided favorable guidance on expenses. One of the questions that I think everybody is wrestling with is how technology, particularly AI is transforming different businesses. Can you talk a little bit about what's driving your favorable expense guidance, but also longer term, how you see AI transforming your business?

Absolutely, Rick. So I would say in terms of favorable performance of expenses, as Dean talked about it in his prepared remarks, we are always prudent in our expense management as a company, and you have seen that play out since our IPO. During 2021, our expenses were close to $240 million, I would say, low $240 million range. And since that time, despite inflationary pressures, we have actually reduced our expenses close to $25 million. And last 3 years, we basically have our expenses trending flat in terms of total expense dollars. So I think that's just our general mindset that when we think about our expenses, we are very mindful of the environment where we are making investments, how do we make our existing processes more efficient, whether it comes to our underwriting processes, whether running rest of the business, we are making technology investments on an ongoing basis to harvest benefits from those investments. Now that being said, we also make technology investments to make smarter decisions. In the past, I've talked about investments in our Rate360 engine, where 6, 7 years ago, we started investments in our data. Then we started investments in machine learning. And as a result, we believe we have a very granular risk-based pricing system in Rate360 that allows us to make decisions and changes at a more granular level and in a more agile way in the market so we can respond to market changes. And lastly, I would say that we also spend time and investments in customer experience. So in places where we can improve customer experience and that allows us to have a bigger footprint in the market. We are proud of our customer base in terms of number of customers we do business with on an active basis. That continues to be close to 1,600 lenders in the country as well as doing business with all top 20 originators in the country. So I would say that's our technology strategy. When it comes to AI, I've said in the past that we continue to invest on that front both for efficiency reasons and making smarter and more granular decisions. So that's basically how we see that playing out for our business.

Got it. Okay. That's helpful. And then just if we can think about a little bit in terms of -- you've increased your return of capital allocation for the year 25%. It's risen steadily throughout the year. This was a strong quarter in line roughly, I think, with at least Street expectations. Is it just that you guys sort of as you move through the year and gather more information, feel more confident in terms of setting your capital return expectations? It's -- I don't think this year is way out of whack with your expectations, and I don't think third quarter or fourth quarter outlook seems radically different. What drives a 25% increase in capital return outlook?

Yes, Rick, it's Dean. I appreciate the question. I think you hit on a lot of the points. When we set our return of capital plans at the beginning of the year, we're thinking about our expectations around business performance. We're thinking about the current and prospective macroeconomic environment, and we're thinking about the regulatory landscape to determine kind of what the appropriate level of capital return is given the intersection of those 3 considerations. I think as we go through the year, we both make assessments how we're doing relative to our original expectations. And then to your point, we're gaining more and more confidence in those drivers as we progress through the year. From my perspective, the increase from $400 million to $500 and even if you go back a quarter, the increase from $350 million to $500 million, I think it reflects both the favorable business performance year-to-date and also certainly an indication of the current level of mortgage originations that are in the market today. I think it's really the combination of those 2 things that has caused us to come back and revise our return of capital guidance upwards.

Got it. And so if I were to summarize that, year has manifested potentially better than your conservative expectations, but this is really about the confidence interval on that performance narrowing to the higher end as we sort of move into fourth quarter.

Yes, Rick, I'm not sure if I would call it conservative expectations. I would just say we operate in an uncertain environment. So we always keep that in mind. You see that in our commentary in our prepared remarks that we are running the business with a mindset that we need to be confident in our actions. And as we gain that confidence with actual performance coming through, we continue to update it along the year. So I think it's just the nature of how we actually manage the business and how we make sure that we can deliver on our promises consistently.

Got it. Fair point that uncertainty has been mitigated as we move through this year in general. That's a fair point.

This concludes our question-and-answer session. I would like to turn the conference back over to Rohit Gupta for any closing remarks.

Thank you, Drew. Thank you, everyone. We appreciate your interest in Enact. And once again, I would like to wrap up the call by thanking all of our employees for their hard work and dedication in fulfilling our mission to help people buy a house and keep it their home. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.