Enact Holdings (NASDAQ:ACT) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Enact Holdings reported strong financial performance in the second quarter of 2026 with adjusted operating income of $177 million, or $1.26 per diluted share, up from $1.15 per share in the same period last year.
The company updated its 2026 capital return expectations to between $550 million and $600 million, reflecting confidence in business performance and a strong financial position.
New insurance written was $15 billion, increasing 19% sequentially and 15% year over year, with a persistency rate of 80%.
The company's Enact Loan Level Assistant, a generative AI tool for underwriting, was announced to improve risk selection and operational efficiency.
Operational highlights include a reserve release of $37 million in the quarter, leading to a 14% loss ratio, and strong credit performance with total delinquencies declining 1%.
Investment income increased to $73 million, up 3% sequentially, driven by a new money investment yield of over 5%.
The company maintained a strong PMIERs sufficiency ratio of 161%, providing financial flexibility, and returned $127 million to shareholders through share repurchases and dividends.
Enact Holdings continues to support housing policy initiatives and participates in the rollout of VantageScore 4.0 to expand access to sustainable homeownership.
Full Transcript
OPERATOR
Hello and welcome to Enact Holdings' second quarter earnings call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Kohl, Vice President of Finance. You may begin.
Daniel Kohl, Vice President of Finance
Thank you and good morning. Welcome to our second 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.
Rohit Gupta, President and Chief Executive Officer
Thank you, Daniel. Good morning, everyone. Before discussing our second quarter results, I would like to begin by saying that our thoughts are with Tom McInerney, who's a valued member of our board and strong supporter of Enact Holdings. We wish Shyam a full and speedy recovery. I also want to express my support for Jerome Upsin as he steps into the role of Interim President and CEO of Genworth. Jerome has been an important member of Genworth's leadership team as well as Enact Holdings' Board of Directors for many years, and I'm confident he will provide thoughtful and steady leadership during this time, and I look forward to our continued partnership.
Turning to our results, Enact Holdings closed the first half of 2026 with another strong quarter, reflecting the disciplined execution of our strategy, resilient credit performance, and our continued focus on long-term sustainable value creation. As a result of our strong performance, we are updating our 2026 capital return expectations to between 550 million and $600 million, up from our prior guidance of $500 million. I will discuss this in more detail shortly.
For the second quarter, we reported adjusted operating income of 177 million, or $26 per diluted share. Adjusted return on equity was 13%, and we generated strong new insurance written of $15 billion, resulting in total insurance in force of $274 billion. The macro and housing environment remained dynamic as elevated interest rates, geopolitical developments, and policy uncertainty continued to contribute to market volatility. At the same time, the U.S. economy was resilient, supported by a healthy labor market and generally stable household balance sheets. Within housing, underlying demand fundamentals are strong, and while higher mortgage rates continue to temper overall transaction volumes, purchase application activity benefited from the spring selling season. From a credit perspective, our portfolio is performing well, with recent books performing in line with our expectations. Persistency remained elevated at 80% during the quarter.
This is supported by the rate environment, with approximately 57% of loans in our portfolio carrying mortgage rates below 6%. Looking ahead, we continue to believe the long-term fundamentals supporting the housing market remain intact, and we are confident that private mortgage insurance will continue to play a critical role in responsibly expanding access to sustainable homeownership while creating attractive opportunities for Enact Holdings. Our insurance in force portfolio remains resilient, with a risk-weighted average credit score of 746 and a risk-weighted average loan-to-value ratio of 93%.
Layered risk was 1.1% of risk in force. Pricing remained constructive in the quarter while our participation was strong, and our dynamic risk-adjusted pricing engine is enabling us to prudently target the right risk at the right price on a granular level as market conditions evolve. As we continue to leverage technology to enable better risk selection and improve operational efficiency, we are pleased to announce that in addition to our pricing engine, we recently launched our Enact Loan Level Assistant, or ELLA.
This new tool is our internal underwriting innovation that applies generative AI to help underwriters make smarter underwriting decisions by reviewing loan documents, identifying inconsistencies, and surfacing relevant insights more efficiently. ELLA reduces repetitive tasks, improves risk selection, and allows our underwriters to spend more time applying their expertise to making underwriting decisions. While it's still early in its launch, adoption has grown rapidly, and we believe ELLA will create a strong foundation for future efficiency improvements.
Turning to losses, new delinquencies were down 9% and cures were down 9% sequentially, consistent with seasonal trends, and total delinquencies declined 1%. Our strong performance was driven by favorable credit trends and effective loss mitigation efforts. This drove a reserve release of 37 million in the quarter, resulting in a loss ratio of 14%. Credit performance remains strong, and we are well reserved across a range of scenarios. We delivered another quarter of prudent expense management, with operating expenses down year over year despite the inflationary environment.
Dean will discuss the key drivers of this strong performance and our improved expectations for 2026. We continue to execute against our capital allocation priority, maintaining a strong and resilient balance sheet to support existing policyholders, investing to drive organic growth and operating efficiencies, funding attractive new business opportunities such as Enact Holdings, and returning excess capital to shareholders. At the end of the quarter, our PMIERs sufficiency ratio was 161%, providing significant financial flexibility, and our credit and investment portfolios were in excellent shape.
Our strong capital position is further reinforced by our CRT program and the backing of our undrawn credit facility. We also continue to execute on our growth and diversification strategy. Enact Holdings delivered another quarter of strong performance, generating attractive risk-adjusted returns while remaining both capital and expense efficient. Finally, our strong performance supports continued robust returns to shareholders. During the quarter, we returned 127 million through share repurchases and dividends.
As I mentioned, we have now increased our capital return expectations to between 550 to 600 million for 2026. This upward revision reflects our commitment to returning excess capital to shareholders while maintaining a strong balance sheet. I'd now like to take a moment to recognize our culture and our people. For the fourth time since our IPO, Enact Holdings was recognized as one of the best places to work by the Triangle Business Journal. We have always taken pride in fostering an environment where teams can do their best work for our customers and stakeholders, and are pleased to have received this recognition again.
Turning to recent housing policy announcements, as I mentioned last quarter, Enact Holdings supports the FHFA and GSEs' ongoing efforts to modernize credit evaluation in ways that responsibly expand access to sustainable homeownership. During the quarter, we began participating in the market's limited rollout of VantageScore 4.0. Although its financial impact during the quarter was immaterial, we remain committed to supporting our customers and staying operationally aligned as initiatives are implemented and scaled in the market.
Overall, we had a great first half of 2026 that positions Enact Holdings for long-term success. With that, I will now hand the call over to Dean.
Dean Mitchell, Chief Financial Officer
Thanks, Rohit, and good morning, everyone. We delivered another strong quarter of performance. Adjusted operating income was $177 million, or $1.26 per diluted share, compared to $1.15 per diluted share in the same period last year and $1.21 per diluted share in the first quarter of 2026. Adjusted operating return on equity was 13.2%. 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 $15 billion in the quarter, up 19% sequentially and up 15% year over year, as rates remained elevated and seasonal dynamics played out across the period.
Persistency was 80% in the quarter, flat sequentially and down 2 points year over year on lower prevailing mortgage rates. While rates increased over the quarter, our portfolio remains resilient, with 12% of our mortgages in our portfolio having rates at least 50 basis points above June's average of 6.5%. At the same time, 57% of loans in our portfolio carry rates below 6%. Primary insurance in force was $274 billion in the quarter, up $1 billion, or approximately 1% from the first quarter of 2026 and up $4 billion, or approximately 2% year over year.
Total net premiums earned were $245 million, up $2 million sequentially and flat year over year. The sequential increase is primarily driven by premium growth from attractive adjacencies and growth in primary insurance in force. Our base premium rate of 39.1 basis points was down 0.3 basis points sequentially. As a reminder, our base premium rate is impacted by several factors, including macro factors driving refinancing activity, and tends to modestly fluctuate from quarter to quarter.
Our net earned premium rate was 34.1 basis points, down 0.2 basis points sequentially and aligned with the decrease in base premium rate. Investment income in the second quarter was $73 million, up $2 million, or 3% sequentially, and up $7 million, or 11% year over year. Our new money investment yield was over 5% and contributed to an increase in the average portfolio book yield to 4.6% for the quarter. While we typically hold investments to maturity, we may selectively pursue income enhancement opportunities during the quarter.
We sold certain assets that will allow us to recoup realized losses through future higher net investment income during the quarter. We continue to see strong loss performance across our portfolio. New delinquencies decreased sequentially to 12,300 in the quarter from 13,600 in the first quarter of 2026, in line with expected seasonal trends. Our new delinquency rate for the quarter remained consistent with pre-pandemic levels at 1.3%, down 20 basis points from the first quarter of 2026 and an increase of 10 basis points from the second quarter of 2025.
Our cure rate decreased 4 percentage points sequentially to 50%, in line with seasonal trends, and remains elevated. We maintained our claim rate on new delinquencies at 8%. Total delinquencies in the second quarter decreased sequentially to 24,300 from 24,700, and the delinquency rate was flat sequentially at 2.6%. Losses in the second quarter of 2026 were $33 million and the loss ratio was 14%, compared to $37 million and 15% in the first quarter of 2026 and $25 million and 10% in the second quarter of 2025.
The current quarter reserve release of $37 million from favorable cure performance and loss mitigation activity compares to a reserve release of $39 million in the first quarter of 2026 and $48 million in the second quarter of 2025. Operating expenses in the second quarter of 2026 were $52 million and the expense ratio was 21%, compared to $49 million and 20% in the first quarter of 2026 and $53 million and 22% in the second quarter of 2025. In the second quarter of 2026, we took actions that resulted in a $1 million reorganization charge that is excluded from our adjusted operating income.
Based on first-half performance and full-year 2026 outlook, we now forecast 2026 expenses, excluding reorganization costs, to be in the range of $205 to $210 million. We continue to operate from a strong capital and liquidity position underpinned by our robust PMIERs sufficiency and the successful execution of our diversified CRT program. Our PMIERs sufficiency was 161%, or $1.9 billion above PMIERs requirements, and our third-party CRT program provides $1.9 billion of PMIERs capital credit at the end of the quarter.
Turning now to capital allocation, during the quarter we paid out approximately $34 million, or $0.24 per share, through our quarterly dividend and bought back 2.2 million shares at an average price of $42.58 for $93 million. Through July 31, we repurchased an additional 0.7 million shares for $30 million. Today we announced the third-quarter dividend of $0.24 per common share, payable September 17, 2026. As Rohit mentioned earlier, we're increasing our 2026 total capital return guidance to be in the range of $550 to $600 million, reflecting our continued strong financial position and confidence in our business.
As in the past, the final amount and form of capital return to shareholders will ultimately depend on business performance, market conditions, and regulatory approvals. Overall, we are pleased with our performance through the first half of the year. As we look ahead, our disciplined approach to risk management, strong balance sheet, and financial flexibility position us well to navigate the evolving environment while continuing to deliver value to our shareholders.
With that, let me turn the call back to Rohit.
Rohit Gupta, President and Chief Executive Officer
Thanks, Dean. Enact is positioned to succeed through market cycles. And by combining disciplined underwriting, a strong balance sheet, thoughtful capital allocation, and continued investment in innovation, we are building an even stronger franchise for the long term. As always, our mission to responsibly help more people achieve the dream of homeownership remains at the center of everything we do. Operator, we are now ready for Q&A.
OPERATOR
Thank you. We will now begin the question-and-answer session. To ask a question, you will need to press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mihir Bathia with Bank of America. Your line is open.
Mihir Bathia, Analyst at Bank of America
Hi, good morning. Thanks for taking my questions. Wanted to start by just asking maybe about the base premium yield. I mean, it's relatively steady, but it is, you know, inside, you know, maybe the third decimal coming down a little bit through the, for the last few quarters. Where do you expect that to settle out and just any expectations you could guide us for, like, you know, the rest of the year? Just, and maybe related to that, if you want to just comment on competitive intensity too, that you're seeing.
Dean Mitchell, Chief Financial Officer
Yeah, Mihir, it's Dean. I'll start with the answer on base premium rate trajectory, and Rohit will, I'm sure, pick up from a competitive perspective in the market. You know, I would say despite the modest first-half pressure, our base premium rate outlook really remains consistent with our 2026 guidance that we gave at the beginning of the year, that we expect it to be relatively flat versus 2025. I think, you know, that could have a slight downward tilt, kind of like we saw in 2025.
But, you know, I would characterize that very much in line with the original guidance of relatively flat. I think we've talked about in prior periods that there's always going to be some quarter-over-quarter volatility. That metric is influenced by a bunch of different variables. We've talked about NIW levels, we've talked about NIW mix, specifically as it relates to purchase/refi, which can change the nature of the risk and change the nature of the pricing; lapse, what book years are lapsing; and then things that aren't always associated with premium rate like delinquent premium accrual. I think we saw some of that volatility play out this quarter, but overall, in terms of the impact on our overall guidance, I think it remains consistent to generally flat versus 2025. Rohit, you want to take competitive environment?
Rohit Gupta, President and Chief Executive Officer
Thanks, Dean. Good morning, Mihir, thank you for your question. So I would just say MI market continues to be dynamic but remains constructive from our vantage point. Pricing, as we have mentioned in the past, was competitive but remains at levels that in our view still reflect somewhat elevated levels of economic uncertainty, and from a pricing return perspective they remain attractive from our vantage point on a risk-adjusted basis and accretive to economic value.
So we are very happy with the $15-plus billion of NIW we wrote in the quarter and the returns at which we wrote that NIW.
Mihir Bathia, Analyst at Bank of America
Can I just follow up on that? Rohit, could you maybe, like, quantify the ROE on new business today, and how does that compare to, I don't know, maybe the 2023, 2024 vintages?
Rohit Gupta, President and Chief Executive Officer
Mihir, I think I'm going to have a tough time giving you any ROE guidance. We have not been providing ROE guidance either in a range or any kind of point estimate. I would say that we find the ROE is accretive to shareholder value, and we've talked about this in the past, that we price NIW on a conditional basis, so not only from a consumer and loan attribute perspective but down to each geography. So just given the granularity of our pricing and returns, as well as the competitive nature of the market and the opaque pricing environment, it's tough to provide guidance on ROE quantitatively, but hopefully the qualitative pillar helps.
Mihir Bathia, Analyst at Bank of America
Yeah, okay, maybe I'll ask one more and then just jump back in the queue. Just on the credit outlook from here, I think new notices fell, default rate was down a little bit, I guess. Any guidance, any commentary on how you expect that to trend from here? Just talk some of the factors that are driving that strength and how you expect default rates to trend from here.
Dean Mitchell, Chief Financial Officer
Yeah, thanks, Mihir. I'll take that. This is Dean again. I think you characterize the credit market appropriately. We see credit performance remaining strong, and that is across both new delinquency development and cures. Both new and cures were down sequentially. I think in our prepared remarks we made the reference that's really consistent with normal seasonality as you transition from Q1 to Q2 of any particular year. If we peel the onion back a little bit, we continue to assess performance across a variety of borrower and loan attributes, but we don't see any material deviation from our pricing expectations when we set price and onboard the risk. So I think across the risk continuum we continue to see performance remain strong and not deviate from our expectations when we onboard the risk and ultimately price the policy. One of the underpinnings of strong cure performance has been home price appreciation. That's a key driver of cure performance today. I think we continue to see strong embedded HPA across our policies in force as well as our delinquencies. So 88% of our delinquencies continue to have mark-to-market equity of 10% or more.
And as you think about the short to medium term, I think that underpins ongoing strong cure performance. We talked about delinquency rate a little bit last quarter as it relates to both the impact of some of the newer vintages contributing more delinquencies as they age up their normal loss development pattern, and of course some of those newer vintages don't have as much embedded HPA. I think that can be a contributor to an uptick in delinquency rate as we move forward in time.
And then just in the short term, while we got the benefit of seasonality over the first half of the year, second-half seasonality tends to see an uptick in new delinquencies. So I think it's reasonable to expect an uptick in delinquency rate from at least first-half levels in the short term.
Mihir Bathia, Analyst at Bank of America
All right, thank you. Thank you for taking my questions.
OPERATOR
Thank you. Your next question comes from the line of Bose George with KBW. Your line is open.
Bose George, Analyst at KBW
Hey guys, good morning. Just a follow-up on credit. Can you talk about when you see delinquencies peaking, just from a normalized seasoning of the portfolio?
Dean Mitchell, Chief Financial Officer
Yeah, Bose, it's Dean again. Much like we talked about in that last answer, I think in the second half you're going to see an uptick in delinquency rate, or potentially an uptick in delinquency rate, given the second-half seasonality that we would expect relative to the first half. And then as you transition into 2027, you have different seasonality start to have a positive impact on cures, new delinquencies, and ultimately that having an influence on delinquency rate.
So from a timing perspective, I think you're going to see a little bit of pressure to delinquency rate over the course of the second half of 2026. And then from there a lot of that's going to be dictated by macroeconomic drivers — what the macroeconomic trajectory is. That'll be a pretty big influence on delinquency inventory and ultimately delinquency rate going forward. But from a seasonality perspective, you're going to see those two seasonality drivers play out — a little bit of pressure in the second half and then a pivot as we enter into 2027.
Bose George, Analyst at KBW
Okay, that makes sense. But if the macro remains stable, just with the newer books that have less HPA for you and everyone in the industry, does it suggest that there is going to be an uptrend in normalized delinquencies as they become a bigger part of the inventory? Is that fair?
Dean Mitchell, Chief Financial Officer
Yeah, I think we've talked about the more recent books having aged through a more moderate home price appreciation path. They've also been originated in a purchase-heavy market, which has modestly higher risk characteristics — a little higher LTVs, a little higher DTIs. So I think it's fair to expect those vintages to produce more new delinquencies as they age up their normal loss development curve, again, all things being equal. The good news there is we price for that risk when we onboard it.
And to date, from a new-vintage perspective — I think Rohit made reference in his prepared remarks — we're not seeing any deviation from our pricing expectations. But yeah, I think those new books are going to produce more delinquencies given their makeup and given the macroeconomic environment that they've aged through to date, vis-à-vis what we saw in 2020 and 2021 vintages, by way of example, that have a tremendous amount of embedded HPA.
Bose George, Analyst at KBW
Okay, great. And then just actually one on the VantageScore loans that you mentioned. Do these loans just have VantageScore, or do they also have a FICO? And then when you underwrite these loans, what do you do differently, given there is less history, etc.?
Rohit Gupta, President and Chief Executive Officer
Yeah. Good morning, Bose. Thank you for the question. I would say these VantageScore loans typically come with just VantageScore, but we are in the early innings of the rollout of VantageScore. As you might remember, there was a limited market rollout, and then it was rolled out subsequently for high-LTV consumers. The number of lenders who are actually sending volume — especially volume in the second quarter — was very small. We will see how lender adoption changes and, depending on which lenders are submitting loans, whether they are sending one score or both scores.
So that's the answer to your first question. From our side, from an underwriting perspective, if you think about our guiding principles, our first guiding principle was right price for the right risk, which is our risk philosophy and we've been talking about that since our IPO. So making sure that as we are switching from classic FICO to VantageScore, we have an ability to assess the capital, the losses, expenses for that loan and then apply it as accurately as we were applying it on classic FICO.
We made progress and we rolled out with high confidence on that, and also made sure that from operational and financial perspectives, we had the right controls and we were supporting our lender partners and consumers. At this point in time, we are in the market with VantageScore pricing accurate down to a loan level. And as the FICO 10T data is coming out, we are getting ready to build the same capabilities on FICO 10T so we can support that rollout as and when it happens.
That's our mindset, and I hope that context helps.
Bose George, Analyst at KBW
Yeah, that's helpful. Thanks.
Rohit Gupta, President and Chief Executive Officer
Absolutely.
OPERATOR
Your next question comes from the line of Rick Shane with J.P. Morgan. Your line is open.
Rick Shane, Analyst at J.P. Morgan
Hey guys, thanks for taking my questions. Bose asked a lot of great questions and it's a pretty straightforward quarter, so there's not a ton left to discuss. But conceptually, I'd love to talk about one thing. HPA is kind of a multifaceted challenge and opportunity for you guys. Obviously it helps with credit on the back book. It potentially drives TAM expansion because it impacts affordability and people's ability to make down payments. But ultimately there is an affordability issue that it creates.
I'm curious where you guys think we really are in that cycle. We've been through this really unprecedented period of HPA four or five years ago, and it started to moderate and probably been for the last year or two below historic average. How do we think about the dynamics for you guys related to that?
Rohit Gupta, President and Chief Executive Officer
Rick, thank you for the question. I would say that's a very complex question that has different implications for our business in the short term and long term. We focus on affordability as the key metric when we think about the balance of all the components you talked about. I would think about home prices, I would definitely think about interest rates, and then I would add income or wage growth over that same time period. If you combine those three components, you essentially get the housing affordability index that we monitor both at the national level and then specifically at a geography level.
To your point, in 2020–2021 we saw a significant increase in home prices, but affordability was still in a good place because we were seeing historically low interest rates in mortgages and wage growth was still good coming out of COVID. I think that helped affordability. But the combination of home prices staying elevated and interest rates doubling coming out of COVID has created this affordability pressure that we have felt for three, three and a half years now.
In our mind, it's the relationship between wage growth and home price appreciation that matters in how affordability gets better. It's not that home price appreciation is bad. Historically, a 3% to 5% home price appreciation was seen as very normal and did not impact affordability because wage growth was about the same or slightly above that home price appreciation, and at the same time interest rates contributed in a constructive way because they were within a narrow range.
The fact that we are operating in a higher-rate environment, in addition to continued elevated home prices, leads to that affordability challenge you're referring to. With current conditions, it's going to take a lot longer for that affordability challenge to get solved. But if we get relief in rates — which the administration is focused on, FHFA is focused on — if we get relief on either the underlying yield or the spreads, then you could see rates coming into a range where consumers find those rates affordable enough.
I'm not saying affordability will be back to 2020 levels, but affordability is good enough for consumers who are on the sidelines to come off the sidelines and participate in the homeownership journey. We have seen proof points of that. If you look at the current affordability levels and think about the pent-up demand that continues to exist in the market for homeownership, when rates come into that 6% range for a 30-year fixed mortgage, we have seen a lot of first-time home-ready consumers come to market and become homeowners.
That's the way we look at the entire picture. Hopefully that provides some context.
Rick Shane, Analyst at J.P. Morgan
No, it's very helpful. And then just one sort of related follow-up. If we go back to the 2023–2024 time frame, I asked you guys some tough questions about loans with one or, you know, temporary rate buy-downs, and I think you guys at the time said that you underwrite to life of loan. I'm of the view that a lot of those buyers had expectations — all mortgage brokers and all mortgage borrowers are rate bulls — and I think all those folks thought they were going to be able to refinance those loans down.
Clearly rates have held up a lot higher. We haven't seen anything in the credit to suggest that your strategy was riskier than you thought. But I am curious, as you sort of think back now, was your view really validated and were we overly cautious at the time?
Rohit Gupta, President and Chief Executive Officer
Yeah. Rick, thank you again for another great question. I would say as a reminder, when we talked about rate buy downs, I think it was 23, 24 and even maybe later than that. First, just out of the gate, there were two components of it, the temporary rate buy downs, but a lot of builder-originated loans used to be forward commitments, or you can call them permanent buy downs. So if you just think about temporary buy downs, those consumers were qualified at the fully indexed rates.
So from an underwriting perspective, those consumers were qualified at the right ratios, debt-to-income ratios, even if they were to get hit with those rate increases which, to your point, might have happened or are about to happen. So for temporary buy downs we have not seen a deterioration in performance. The performance has held up pretty well. And then for the forward commitment or permanent rate buy downs, those consumers actually have no rate shock coming because the lender in this case actually had bought the rate down for the life of the loan.
So those continue to perform very well.
Rick Shane, Analyst at J.P. Morgan
Got it. Appreciate the follow-up. Thank you, guys.
OPERATOR
Thank you. Your next question comes from the line of Roland Mayor with RBC Capital Markets. Your line is open.
Roland Mayor, Analyst at RBC Capital Markets
Hi, good morning. Thank you for taking my questions. Just a quick numbers one to start. Does the expense guidance you offered include amortization, or is it just your acquisition and operating expense line?
Daniel Kohl, Vice President of Finance
Thanks, Roland. This is Daniel. No, that's a good question. It includes both operating expenses and the amortization on our P&L. Okay.
Roland Mayor, Analyst at RBC Capital Markets
And then going on that, could you just help me understand the trade-off between expenses and losses as the prior-year development comes down a bit? Is there an expense offset due to lower variable comp?
Daniel Kohl, Vice President of Finance
No. Well, what I'd say is our expense guidance takes into account our expectations for the full year, and we're really happy with that expense guidance. And really it's just a reflection of our continued journey since the IPO, where we've been able to take out about 15% of our expense base. And that's in a really high inflationary environment. And in fact, if you adjust for inflation, that's about 30% from an adjusted-for-inflation basis. And so, you know, that's just a continuation of our proven approach to expense management and really does reflect just that approach and that disciplined approach that we've taken in the last several years.
Dean Mitchell, Chief Financial Officer
Roland, as it pertains to impact of any kind of incentives and prior-year development and this year's development, that essentially is reset every year anyway. So just think about the short-term incentives are set by the board every calendar year based on the projections for that calendar year. But to a certain degree, it's not that we are going off year-over-year comparisons. The performance is measured against goals set for calendar year 2026.
Roland Mayor, Analyst at RBC Capital Markets
That's super helpful. And then if I could just do one more. Can you help us understand the difference between like a 550 million capital return and 600 million? It said that regulatory approvals were a factor. Are we waiting on a Holdco dividend approval, or is it something else that would change the end of the range you end up on?
Dean Mitchell, Chief Financial Officer
Yeah, Roland, it's Dean again. Thanks for the question. I think we made reference to really three dynamics, three drivers that we look at and think about as it relates to our total capital return guidance: business performance, macroeconomic environment—so the prevailing and prospective view on how the macroeconomic environment will influence the market and our business—and then regulatory environment. What I would say as kind of the fundamental driver for the increase in guidance from our prior 500 million to our new range of 550 to 600 million is really foundationally integrated into our business performance.
So business performance has been very strong over the first half of the year, gives us additional confidence. First of all, it gives us additional excess capital, but in addition to that gives us additional confidence to return more capital to shareholders. Embedded in that business performance is obviously a picture of the market in NIW, and given that we're in a slightly smaller market than what we anticipated at the beginning of the year, another kind of foundational driver for why the increase in guidance for full-year capital return for 2026.
We'll continue to evaluate the other direct drivers as well. We think the macroeconomic environment has remained resilient, and there's really no change in the regulatory environment. It's still what we believe to be accommodative of the increased return-to-capital guidance that we gave.
Roland Mayor, Analyst at RBC Capital Markets
Thank you. Really appreciate the answers.
Dean Mitchell, Chief Financial Officer
Yep. Thanks, Roland.
OPERATOR
There are no further questions at this time. I will now turn the call back over to Rohit Gupta for closing remarks.
Rohit Gupta, President and Chief Executive Officer
Thank you, Danny. And thank you, everyone. We appreciate your interest in Enact Holdings, and we look forward to seeing many of you at Barclays 24th Annual Global Financial Services Conference on September 14th in New York.
OPERATOR
Thank you. That concludes today's call. Thank you all for joining, and you may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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