AM Best Assigns Credit Ratings to Enact Holdings, Inc. and Operating Subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)–#insuranceAM Best has assigned a Financial Strength Rating (FSR) of A- (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) to 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 assigned an FSR of A- (Excellent) and a Long-Term ICR of “a-” (Excellent) to Enact Re Ltd. (ERL) (Bermuda). Lastly, AM Best has assigned a Long-Term ICR of “bbb-” (Good) to EHI. The outlook assigned to these Credit Ratings (ratings) is stable.

EMIC is the flagship operating company and is 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. ERL is a newly formed non-exclusive, affiliate that intends to operate primarily as a mortgage reinsurer that received its class 3A Bermuda (re)insurance license in May 2023. ERL is a direct subsidiary of EMIC and has entered into a quota share reinsurance agreement to assume risk from EMIC.

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

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

AM Best assesses the Enact US-domiciled companies’ operating performance as adequate based on positive underwriting results as reflected in loss and combined ratios over the past five years. The companies’ expense ratio has been stable.

AM Best assesses the Enact US-domiciled companies’ business profile as limited because the companies are monoline mortgage insurers. Furthermore, they face stiff competition, not only from other private mortgage insurers, and governmental agencies (i.e., Federal Housing Administration and Veterans Affairs) providing mortgage insurance, but also from products that effectively reduce the demand for private mortgage insurance. In addition, the 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.

The ratings of ERL reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile, and appropriate ERM. The ratings also reflect rating enhancement from EMIC.

ERL’s risk-adjusted capitalization, as measured by the BCAR, is currently at the strongest level on a stressed and unstressed basis in 2023. After 2023, the company’s BCAR is estimated to stay at the very strong level for the rest of the initial five-year horizon.

In the first few years, most of ERL’s business will be assumed from EMIC, so ERL’s operating performance will largely follow the net operating performance of EMIC. As a result, AM Best assesses ERL’s operating performance as adequate.

AM Best assesses ERL’s business profile as limited because it is a mortgage reinsurer. The business plan calls for ERL to assume risk primarily via the quota share reinsurance agreements with EMIC and participate on GSE credit risk transfer (GSE CRT) and similar transactions.

AM Best assesses ERL’s ERM as appropriate because ERL is subject to the same ERM framework as EMIC.

ERL’s assigned ratings reflect rating enhancement from ERL’s close relationship with EMIC. ERL is integrated within the rest of the Enact organization by having the same management and using the same key functions such as finance, claims, underwriting and actuarial. ERL is a meaningful addition to the broader Enact organization because it provides capital flexibility due to its quota share agreement with EMIC and provides a way for the organization to get exposure to the GSE CRT business and other similar opportunities.

The ultimate parent of the Enact entities is Genworth Financial, Inc. (GFI) [NYSE: GNW].

There is a material degree of separation between the credit profile of GFI and the credit profile of EHI and its operating companies because of EHI’s partial initial public offering (IPO) in 2021 and the associated governance framework that was put in place.

The independent capital committee (ICC) is perhaps the most significant component of the governance framework that supports the material degree of separation between GFI and EHI. The ICC provides independent oversight of capital flows between EHI and GFI, specifically regarding debt and equity issuances, dividends and repurchases, or other capital contributions. The ICC must determine affirmatively whether any proposed capital action is in the best interests of minority public shareholders. The ICC is intended to separate EHI and its subsidiaries from the weaker credit profile of GFI.

GFI still retains an ownership stake of approximately 80% in EHI and ultimate control over it, so some residual risk to EHI from the weaker credit profile of GFI remains. But the IPO and governance framework significantly mitigate the risk that GFI poses to EHI, and ultimately support the material separation between the ratings of GFI and the ratings of EHI and its subsidiaries.

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.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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