AM Best Upgrades Credit Ratings of Enact Holdings, Inc. and Certain Operating Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” (Excellent) from “a-” (Excellent) of the following operating subsidiaries of Enact Holdings, Inc. (EHI) (Delaware) [Nasdaq: ACT]: Enact Mortgage Insurance Corporation (EMIC) and Enact Mortgage Insurance Corporation of North Carolina (EMIC-NC) (collectively referred to as the Enact US-domiciled companies). Both operating companies are domiciled in Raleigh, N.C. In addition, AM Best has upgraded the Long-Term ICR to “bbb” (Good) from “bbb-” (Good) of EHI. The outlook of these Credit Ratings (ratings) has been revised to stable from positive.

EMIC is the flagship operating company and an approved mortgage insurer by Fannie Mae and Freddie Mac, the government sponsored enterprises (GSEs), and is therefore subject to the GSEs’ Private Mortgage Insurer Eligibility Requirements (PMIERs). EMIC-NC is an operating company that insures mortgages that are not intended to be sold to the GSEs.

The ratings of the Enact US-domiciled companies reflect their balance sheet strength, which AM Best assesses as very strong, as well as their strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

The Enact US-domiciled companies’ balance sheet strength assessment of very strong is supported by risk-adjusted capitalization at the strongest level on a stressed and unstressed basis, as measured by Best’s Capital Adequacy Ratio (BCAR), along with the companies’ programmatic use of reinsurance and compliance with PMIERs.

The rating upgrades reflect improvements in balance sheet strength and diminishing risk posed by EHI’s ultimate parent, Genworth Financial, Inc. (GFI) [NYSE: GNW]. Although the credit profile of GFI still poses risk to the Enact US-domiciled companies’ balance sheet strength, the risk is less than it has been in the past because of the meaningful separation between GFI’s credit profile and the credit profile of EHI. This separation was achieved through EHI’s governance structure, along with a trend of equity growth at EHI and improvement in the risk-adjusted capitalization in GFI’s legacy runoff companies.

AM Best assesses the Enact US-domiciled companies’ operating performance as strong based on favorable underwriting results, as reflected in loss and combined ratios over the past five years.

AM Best assesses the Enact US-domiciled companies’ business profile as limited because the companies are monoline mortgage insurers, covering U.S. single-family mortgage loans. Furthermore, they face stiff competition, not only from other private mortgage insurers and governmental agencies providing mortgage insurance (i.e., Federal Housing Administration and Veterans Affairs), but also from products that effectively reduce the demand for private mortgage insurance. In addition, product risk is considered high because the performance of the mortgage insurance industry is linked to the macroeconomic environment and the policies of the GSEs.

The overall ERM assessment is appropriate because the Enact US-domiciled companies employ a robust ERM framework and infrastructure embedded across the companies. The companies’ ERM framework is commensurate with the size, nature and complexity of its mortgage insurance business.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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