Enact Holdings, Inc. Q1 FY2022 Earnings Call

Hello, and welcome to Enact's First 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 today, Daniel Kohl, Vice President of Investor Relations, you may begin.

Welcome to our first 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, our performance and progress against our strategy. Dean will then discuss the details of our first quarter results before turning the call back to Rohit for some closing remarks. After prepared remarks, we will take your questions. The earnings materials we issued after market closed yesterday contains Enact's financial results for the first quarter of 2022 and a comprehensive set of financial and operational metrics are available on the Investor Relations section of the company's website at www.ir.enactmi.com under the section marked Quarterly Results. 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 that are subject to risks and uncertainties, which may cause actual results to materially differ. We undertake no obligation to update or revise any 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 are available on our website. Also, please keep in mind the earnings materials and management's prepared remarks today will 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, and welcome to our first quarter earnings call. The first quarter marked an excellent start to 2022 for Enact. We grew our portfolio 10% year-over-year; initiated a quarterly dividend program; and generated strong operating and financial results, including adjusted operating income of $165 million or $1.01 per share and return on equity of 16.2%. Importantly, we achieved these results while also maintaining our commitment to balance sheet strength and strong risk management. We continue to execute on our strategy in a dynamic market environment. We strengthened and deepened relationships with customers, providing them with innovative solutions and prudently pursued opportunities to win new business. We also continued to prioritize a strong balance sheet that provides financial flexibility to support our existing policyholders, invest for growth and return capital to shareholders. We have said that one of the key benefits of our IPO would be the ability to strengthen and expand our client relationships as a result of our enhanced financial strength and independence. And last quarter, we noted that we had reactivated our relationship with a key customer. We've seen this momentum continue in the first quarter as we have either deepened or activated relationships with a substantial number of targeted customers. This progress contributed to our strong insurance in force performance in the first quarter of 2022, up 10% from a year ago to record levels as we continue to write profitable new business. We have told you that we are committed to pursuing high-quality business as we target the right price for the right risk with new business pricing yielding low to mid-teen returns in 2022. During the quarter, we saw pricing on new insurance written continue to stabilize with fewer and lower magnitude of pricing moves in the market. The high credit quality of our portfolio was again evident in the quarter. The weighted average FICO score of our portfolio at quarter end was 742. Our average loan-to-value ratio was 93%, and our layered risk concentration remained low at about 1.6%, a level that we believe is sustainable. The combination of effective risk management, our focused loss mitigation efforts and the continued economic recovery resulted in a $50 million reserve release, which contributed to our loss ratio of negative 4%. Core activity was again robust and outpaced new delinquencies, resulting in a continued decline in total delinquencies. We did see a modest uptick in new delinquencies sequentially during the quarter, something that is to be expected as our newer, large books age and track to normal loss patterns. These newer books continue to perform in line with our expectations at origination. During the quarter, we successfully executed 2 additional excess of loss reinsurance transactions to strengthen our capital position and acquired loss protection on our newer books. The execution of these transactions demonstrates our ability to source cost-effective PMIERs capital and loss protection in a period of capital markets volatility and widening spreads. As of the end of the quarter, 93% of our risk in force was covered by credit risk transfers. Notably, we ended the quarter with the second-highest PMIERs buffer to published standards in our history at 176% or $2.3 billion of sufficiency. The strength of our business and balance sheet positioned us to achieve a significant milestone in our capital allocation strategy with the announcement that our Board of Directors approved the initiation of our dividend program, reflecting our intent to pay a quarterly cash dividend. The first of these will be paid in the second quarter of 2022 at $0.14 per share. This is a significant step that reflects our confidence and focus on meeting our commitment to create value for shareholders, and we plan on returning additional capital by year-end. Dean will provide more details about the quarterly dividends and speak to our capital allocation framework in a moment. Before I turn it over to Dean, I would like to discuss the current environment and how we are thinking about the business in 2022. We've all seen the headlines. Market dynamics are undoubtedly complex but remain supportive overall for our business. Factors such as changes in interest rate policy which is leading to higher mortgage rates and home price appreciation present challenges to affordability. However, the consumer remains resilient with higher savings than pre-pandemic levels, the labor market is very strong, housing supply remains at historical lows and the ongoing post-pandemic shift towards homeownership all underpin strong home-buying demand. We believe this demand will continue to drive a robust purchase originations market in the near term, which drives a healthy private mortgage insurance market. Further, as a consequence of higher interest rates, we expect the persistency of our insurance in force portfolio to improve as refinancing activity declines. Importantly, both Enact and the industry have evolved substantially in the last decade. The implementation of the qualified mortgage definition which drives higher credit and manufacturing quality; the move to granular risk-based pricing, which produces greater uniformity and risk-adjusted returns executed at a faster pace and a resilient credit risk transfer program at cost-effective levels all drive an improved and stable framework for our business. These enhancements combined with our strong balance sheet and 93% of our book being covered by credit risk transfer programs provide us with significant financial strength and flexibility. In addition, the investments we have made in innovation and digitization to enable auto-decisioning in underwriting and pricing granularity drive superior risk management and loss mitigation and we have significantly strengthened the quality of our loan portfolio. Today, we are better positioned than ever to leverage our deep experience to adapt, manage, and grow in a market that we believe continues to provide significant opportunities for prudent growth within our risk-adjusted return appetite. We will monitor and navigate these dynamics every day as we have been as we continue to execute on our strategy. We are encouraged by our performance to date and confident in our ability to execute going forward. I will now turn the call over to Dean to discuss our first quarter performance in more detail.

Thanks, Rohit. Good morning, everyone. We delivered very strong financial results in the first quarter of 2022. GAAP net income was $165 million or $1.01 per diluted share as compared to $0.77 per diluted share in the same period last year and $0.94 per diluted share in the fourth quarter of 2021. Adjusted operating income was also $165 million or $1.01 per diluted share in the quarter as compared to $0.77 per diluted share in the same period last year and $0.94 per diluted share in the fourth quarter of 2021. Turning to key revenue drivers. New insurance written was $19 billion for the quarter, in line with our expectations and down sequentially from $21 billion, primarily driven by seasonally lower purchase originations. New insurance written for purchase transactions made up 92% of our total NIW for the quarter, up from 90% last quarter. In addition, monthly payment policies remained at 91% of our quarterly new insurance written consistent with last quarter. Insurance in force reached a new record of $232 billion, up 10% from the first quarter a year ago and up 2% sequentially. The year-over-year increase was primarily driven by strong new insurance written and increased persistency. Risk in force at quarter end was $58.3 billion, up from $56.9 billion at year-end and $52.9 billion in the first quarter of 2021, primarily driven by our growing insurance portfolio. With increasing interest rates, we saw an increase in persistency during the first quarter. Persistency for the period improved to 76%, up from 69% last quarter and 56% in the first quarter of 2021. In addition to rising mortgage rates, the increase in persistency was driven by a continued decline in the percentage of our in-force policies with mortgage rates above current market rates. Revenues for the quarter were $270 million compared to $273 million last quarter and $289 million in the same period last year. Net premiums earned were $234 million, down 7% year-over-year and down 1% sequentially driven by the lapse of older, higher-priced policies as compared to our new insurance written and lower single premium cancellations as persistency increased. In addition, the decrease in net premiums earned year-over-year was also driven by higher ceded premiums in the current quarter from the expanded use of our credit risk transfer program. These factors were partially offset by growth of our insurance in force. Our base premium rate of 42.3 basis points was down 1.1 basis points sequentially and 4 basis points year-over-year driven primarily by the lapse of older higher-priced policies as compared to our new insurance written. As we've discussed in the past, there are a number of macroeconomic and consumer-driven factors that drive movements in premium rates, which can be volatile on a quarterly basis. Given our view of the current market and related assumptions, including our assumption on persistency, our 2022 full-year estimate is an approximately 4 basis point decline in premium rate or 3 basis points over the remainder of 2022. Transitioning to net earned premium rate, in addition to the lapse of older, higher-priced policies as compared to our new insurance written, our net earned premium rate is also impacted by lower single premium cancellations and higher ceded premiums from our credit risk transfer program. Investment income in the first quarter was $35 million, flat both sequentially and versus a year ago primarily as our larger portfolio was offset by lower bond calls during the quarter given the rising interest rate environment. Turning to credit. Losses in the quarter were negative $10 million as compared to $6 million last quarter and $55 million in the first quarter of 2021. Our loss ratio for the quarter was negative 4% as compared to 3% last quarter and 22% in the first quarter of 2021. The benefit in losses and loss ratio in the quarter was primarily driven by $50 million of reserve release, primarily on 2020 COVID-related delinquencies which have cured at levels above our prior expectations. New delinquencies in the quarter were approximately 8,700, an increase of approximately 400 sequentially and a decrease of approximately 1,300 from year ago levels. The sequential increase in new delinquencies was primarily driven by our large new books that are aging and going through their normal loss development pattern and performing in line with our expectations. Our new delinquency rate for the quarter was 0.9%, consistent with pre-pandemic levels of development and indicative of ongoing recovery. Our claim rate estimate on new delinquencies for the quarter was approximately 8%, consistent with the claim rate for new delinquencies throughout 2021. Our first quarter total delinquencies of approximately 22,600 and the associated delinquency rate of 2.4% represent ongoing improvement in both measures driven by the continuation of cures outpacing new delinquencies. Cures in the quarter of approximately 10,800 decreased modestly as compared to the prior quarter and represented a cure ratio of 124%. I'll now turn to our ever-to-date cure performance on COVID-19 new delinquencies or those new delinquencies since April of 2020. As depicted on Page 12 of our earnings presentation, to date approximately 93% of the 2020 COVID delinquencies have now cured. Cures on COVID-related delinquencies have been aided by favorable resolutions of forbearance programs, home price appreciation and our loss mitigation efforts. As a result, cumulative cure rates have continued to increase through time and are the primary driver of the reserve release actions taken in the current quarter. The embedded equity position of our delinquent policies remains substantial with approximately 97% of our delinquencies as of the end of the quarter having an estimated 10% or more mark-to-market equity using an index-based house price assessment. As I've noted in the past, this can serve as a potential mitigant both to the frequency of claim as well as the potential future loss for delinquencies that ultimately progress to claim, and we saw evidence of this trend during the quarter. Turning to expenses. Operating expenses for the quarter were $57 million, and the expense ratio was 24% as compared to $59 million and 25%, respectively in the fourth quarter of 2021. As a reminder, operating expenses in the fourth quarter of 2021 included $1 million of strategic transaction preparation costs and restructuring costs. Moving to capital and liquidity. Our PMIERs sufficiency increased sequentially in the first quarter to 176% or approximately $2.3 billion above the published PMIERs requirements compared to 165% or $2 billion in the fourth quarter of 2021. At quarter end, we had approximately $1.6 billion of PMIERs capital credit and approximately $1.8 billion of loss coverage provided by our credit risk transfer program. As Rohit referenced, this quarter we executed 2 reinsurance transactions as part of our credit risk transfer program. The first reinsurance transaction secured excess of loss coverage from a panel of highly rated reinsurers covering our new insurance written throughout 2022. In addition, we executed another $325 million excess of loss reinsurance transaction on the second half of 2021 risk in force, leveraging the traditional reinsurance market. We believe this transaction serves as another proof point to the value of diversified capital sources, which allowed us to secure incremental coverage on attractive terms despite volatility in other parts of the market. Since its inception in 2015, we have executed a total of $4.4 billion of loss protection through our credit risk transfer program through both the traditional reinsurance market and capital markets. As previously announced, our Board of Directors approved the initiation of a quarterly dividend program. The initial quarterly dividend for the second quarter of 2022 will be $0.14 per share payable in May. Future dividend payments will be subject to Board of Director approval and targeted to be paid in the third month of each subsequent quarter. During April, our primary mortgage insurance operating company, Enact Mortgage Insurance Corporation, or EMICO, distributed $242 million from its paid-in capital to our holding company, Enact Holdings Inc. We intend to use these proceeds and additional distributions in part to fund the quarterly dividends as well as to bolster our financial flexibility at our holding company and return additional capital to shareholders. We believe the initiation of a quarterly dividend program reflects meaningful progress towards our 2022 capital management plans. In addition to the quarterly dividend, we plan to return additional capital to shareholders later in the year. We'll continue to evaluate the most appropriate amount of total capital to return to shareholders over the course of 2022. Our ultimate view will be shaped by our capital prioritization framework, which prioritizes supporting our existing policyholders, growing our mortgage insurance business, funding attractive new business opportunities and returning capital to shareholders. Our total return of capital will also be based on our view of the prevailing and prospective macroeconomic conditions, the regulatory landscape and business performance. So to recap, we generated very strong performance in a dynamic macroeconomic environment. As we continue to execute through the remainder of the year, we will maintain a disciplined approach to capital and liquidity while investing in our growth and returning capital to shareholders. With that, I'll turn it back to Rohit.

Thanks, Dean. All in all, a very strong start to the year. I'd like to thank each and every member of the Enact team for their contributions to our performance. Our company is well positioned for 2022 and beyond as we continue to build on the momentum we have generated. With record insurance in force and a strong balance sheet, we are confident in our business and in our ability to successfully navigate this dynamic market. Our role in helping families achieve their dreams of homeownership has become even more important in today's market environment. In the first quarter, we made it possible for 55,000 home buyers to qualify for a mortgage who otherwise might not have while also working hard to keep others in their homes through loan modifications. We are very excited by and proud of the role we play in this market and remain committed to working with Capitol Hill, the administration, trade groups and consumer advocates to drive solutions that increase the accessibility, affordability and sustainability of homeownership. We are now ready to take your questions. Operator?

Our first question will come from Rick Shane from JPMorgan.

As the market continues to evolve with increased competition among originators and declining volumes, I am curious to know if you are experiencing any pricing pushback or, more importantly, if there are aggressive loan structures becoming more common.

So I would say having seen some competition in the market in the origination market space in the last 4 months as interest rates have gone up by almost 200 basis points, we have not seen an impact of that coming over to the MI industry, either in terms of asking for more pricing competition on the MI price or in terms of credit policy or loan structuring. So at this point of time, we believe that those dynamics continue to remain similar to what we have seen in the past.

And when you think of sort of analogs historically, where do you think we are? What is the most comparable time frame to think about in terms of the competitive landscape and the evolving environment?

And Rick, when you say competitive landscape, you are referring to MI industry or origination at broad similar to your first question?

Actually, probably both. I hadn't bifurcated it in the way that you're describing. But I think it's important to consider both.

So on the origination market, it's probably not our place to comment on what the competition dynamics are and what can it be comparable to. I would say in the MI marketplace, as I said in my prepared remarks, we continue to see stabilization in pricing. We saw fewer and lower magnitude of pricing moves in the market in the first quarter. So that gives us confidence that we are approaching that point of stabilization. And in terms of finding a comparable point historically, I would just say the macro conditions are so different than many of the times we have gone through in the last 2 decades in the industry that it's difficult to compare the current dynamics to any of the prior economic or kind of industry dynamic time.

Rohit, I appreciate the last comment. I agree with you. I think we're grasping at straws in terms of understanding this environment as well. It's part of what drives the question.

Our next question will come from the line of Doug Harter from Credit Suisse.

Understanding that, as you just said, the environment is different. But how do you think about persistency in particular, the potential for policyholders to cancel their policy given the strong home price appreciation that we've seen?

I'll start off talking about persistency in general. I'll turn it over to Rohit to talk about borrower behavior as it relates to borrower initiated cancels. So just to recap, persistency was up to 76%, up 7 points sequentially and 20 points year-over-year, driven primarily by higher interest rates. I think given the loan origination process and time from borrower qualification on loan closing, there's still about a month or 2 lag between persistency results and really current market conditions. So our Q1 persistency of 76% really doesn't include the recent runoff of mortgage rates that took place throughout February and March. And as a result of that, I think we'd expect future persistency to continue to increase above Q1 levels as we make our way out of the quarter and into the remainder of the year. Rohit, I'll turn it over to you for a borrower.

So Doug, I would just add to Dean's question, one extra point on persistency and then borrowers. I think on persistency, bigger picture, we expect persistency to be a tailwind in our ability to grow our portfolio as our $232 billion of insurance in force stays longer. And it gives us an ability to also hedge against any pressure on market originations just from higher interest rates and higher home prices. Now on borrower-initiated cancels, we believe that it's at least driven by 2 factors and there might be more. First one for borrower-initiated cancels, which is essentially borrower goes out, gets an appraisal, submits that appraisal to their servicer to request a cancellation under HOPA. GSEs have a seasoning requirement, which is a combination of number of years and current loan-to-value requirements. That applies to borrowers to cancel MI based on updated appraisal and updated home price. Second thing is it requires an action on borrower's behalf to spend money, get an appraisal and submit it to their servicer to see if they qualify. So they have to spend anywhere from $200 to $400 on an appraisal, take that initiative and then not have the certainty of that cancellation. So that's how we think about the considerations in terms of actual trends of borrower cancellations. We have seen some volatility in that number recently and in the past, even going back 2.5 years ago. It's a very small portion of our business, and we are keeping an eye on it. So nothing meaningful to report at this point of time outside of that comment.

I guess what is the seasoning requirement just so I'm aware of that?

The first seasoning requirement is a minimum of 2 years. For GSE loans, which make up a significant portion of our portfolio, after 2 years but before 5 years, the updated current loan-to-value needs to be 75% for cancellation. Beyond 5 years, that requirement drops to 80% current loan-to-value based on appraised value. If you consider our insurance in-force concentration, the last two vintages, 2020 and 2021, make up 66% of our book. Adding 2022 to this increases that figure by another 8 points. Therefore, that portion of our book barely meets the seasoning requirement, which informs our view on in-the-money risk related to borrower-initiated cancellations.

Our next question comes from the line of Bose George from KBW.

Actually, first, just one on the dividend. When we look out into kind of 2023, are we likely to see the dividend more in the form of just a regular dividend or is this the plan to have kind of a base dividend and then sort of a special each year?

As you look ahead to 2023, you can anticipate our return of capital plan will include several elements, including the quarterly dividend we announced last week, along with other forms of returning capital, such as a special dividend, a share buyback, or a combination of both.

Switching to underwriting, with the strong appreciation in home prices, are you making any adjustments in how you underwrite newer loans? Are your loss expectations changing due to the ongoing increase in home prices?

Thank you for the question. We are continuing our usual practices of monitoring the market and adjusting our pricing and credit policies based on our market insights, both at the national and geographic levels. One of the advantages of our risk-based pricing approach is our ability to make quick adjustments as market conditions change. For example, in April and May of 2020, we made three pricing changes in just five weeks, raising our prices by 20% as the pandemic began to spread and affect regions of the country. This reflects our adaptability in a complex risk-based pricing environment, so I won't comment specifically on pricing actions. However, from an underwriting perspective, both in the mortgage insurance sector and in the mortgage finance industry as a whole, the qualified mortgage definitions and regulatory boundaries are significantly improved compared to pre-global financial crisis conditions. We continue to see strong credit and manufacturing quality. Our risk metrics also show robust portfolio quality, whether viewed through FICO scores or debt-to-income ratios. The layered risk metric we disclosed in our earnings presentation is currently at 1.6% for total risk in force, which we believe is sustainable. For new insurance written, that layered risk metric is even lower at 0.8%, giving us confidence that we are making prudent decisions with a macro perspective in mind.

Our next question will come from the line of Geoffrey Dunn from Dowling & Partners.

Just a couple of, I guess, a number of questions to start. Dean, first, is there a possible consideration for another dividend up from the distribution this year given your current expectations for how the results can play out?

I think that's I think that would be part of our capital plan for 2022 is some additional potential distribution or dividend, but just proceeds coming from the operating company to the holding company.

I have noticed some actuarial suggestions regarding potential changes in cancellation rates or persistency. I'm interested to know if you believe that to observe persistency consistently above 80%, we would have to look back to 2000, excluding the years of the Great Recession. Considering our starting point with current rates and the size of the portfolios established at those rates, does your analysis indicate that we might see persistency improve to something closer to the mid-80s compared to the historical average of around 78% to 80%?

It's a little harder to predict that, Geoff. For the reasons you just described, we have the combination of large, newer books written at historically low interest rates coupled with a rising interest rate environment, both of which are reasonably new trends to the industry. I would say just looking at Q1 results of 76% persistency and not having the full weight of interest rates from March embedded in them, I think we could see certainly progression back to the long-run normal of 80%. But I think it's fair to think that, that can go above an 80% long-run historical persistency rate.

Just to add another perspective, I share the same agreement with these comments. The equity that people have in their homes, especially against their mortgages, is another factor that sets this situation apart due to the significant embedded equity. Are you noticing an increase in loan payoffs? While we haven't observed that trend historically, it has emerged in the last two years. Consumer savings have notably risen compared to pre-pandemic levels, with estimates indicating that total consumer savings are approximately $2.5 trillion higher than before the pandemic. When you factor in home equity, could this lead to increased prepayments? While I generally concur with Dean, based on what we see in Q1 and the interest rate trends in Q2, we anticipate these numbers may increase.

And then last, a big picture question on credit. When you think about the ultimate drivers of ultimate credit performance, what is more important, unemployment or home price appreciation? And I'm trying to think of this in terms of where we are today with the buildup of equity relative to concerns about a possible recessionary pressure. What is the bigger factor in the loss models?

Yes, Geoff, I would say the way you asked the question, I think you're implying that if we were to think about not delinquencies but eventual claims and losses. Right?

Yes, just credit, call it, credit at the end of the day, the ultimate economic credit loss, what is a more important factor?

So I would say from what we have seen in the recent cycle, if you just extrapolate that, that unemployment went up, we saw a significant increase in delinquencies, and we've been reserving against those delinquencies. But given the home price appreciation that Dean mentioned in his prepared remarks that 97% of our delinquencies have at least 10% equity in front of them, that has been a good mitigant for both frequency and severity. So I would say, if you were looking at delinquency development, unemployment is more important. But if you are thinking about a mitigation to eventual claim and eventual loss to our book, a significant rise in home prices acts as a meaningful mitigant to eventual loss. And I'll just ask our Chief Risk Officer, Michael Derstine to see if he has any additional perspective to add.

I would concur with those remarks. Home price appreciation is definitely viewed in our modeling considerations as an important mitigant. I think we've also seen in this environment much less equity extraction in the form of second lien. So we believe that, that mitigant is stable through time. So we do believe that, that is an important way to think about ultimate credit losses. Home price appreciation will have a benefit to that.

Our next question will come from the line of Mihir Bhatia from Bank of America.

I guess maybe to start. Just wanted to make sure I understand. Just in terms of what you've seen recently, maybe on either NIW applications, whatever in April. Like has there been any impact from higher rates on the demand for purchase mortgage originations. I can't understand on the refi side and things like that. But purchase mortgage originations, has there been any impact from the higher rates that you've seen yet?

Looking at our Q1 results and the general trends in the Q1 origination market based on current estimates, Q1 appears to be strong both in terms of origination and mortgage insurance. This has been influenced by a decrease in the purchase market of about 12% in aggregate, while the refinance market has dropped even more significantly. That quarter seemed to align with a 3.8% fixed rate for 30-year mortgages. As we move into the second quarter, interest rates have risen over the past four weeks to around 5.4%. We are monitoring early indicators, which are not definitive, but the MBA purchase applications on a four-week moving average are down 6% from a month ago, and refinance applications have seen a larger decline. It’s still too early to determine the long-term origination trends. We believe that our business model's persistency serves as a strong mitigant against any pressure on mortgage originations. In considering our top line growth and insurance in force growth, we analyze how interest rates are moving in the market and whether our existing insurance in force shows improved stickiness, which consequently impacts new originations. However, it's premature to comment definitively on how market conditions, particularly higher interest rates, will affect consumers. I would like to emphasize that this cycle and economic environment appear different; while higher interest rates and increased home price appreciation affect consumer affordability, these factors seem to be balanced out by higher consumer savings, a robust labor market, and very low housing inventory.

No, that's fair. And then just wanted to confirm on the expense. I think your guidance for the full year was around $240 million. Obviously, $57 million, a little bit light on that. Any update to that, or should we still think of $240 million for the full year?

No. Our costs are not linear throughout the year and tend to increase in later quarters as a result of drivers such as performance-based incentive compensation and others. In addition to that, I'd just call out that we're not complete in our journey of standing up certain public company activities. And while we're well on our way, we still have a little bit more room to go. So I think the $240 million guidance that we provided last quarter remains intact. We'll obviously continue to evaluate that through time. But I think that's still a good number.

I have one last question regarding the capital return discussion. It seems that the focus has been mainly on dividends, especially with the recent launch of the quarterly dividend. However, I wanted to know more about the incremental capital return you mentioned, whether in the dividend announcement or today’s presentation. Is there a possibility of considering a buyback? Your shares are currently trading below book value, and I understand the need to maintain liquidity. However, can you find a way to collaborate with the parent company to maintain their stake while implementing a buyback? I'd like to understand the potential for a buyback in your future capital return strategy and how you are weighing that against the options of a special dividend or an increased quarterly dividend.

So absolutely, we are very happy with the results we have produced in terms of returning capital to shareholders at this point of time with our $1.23 dividend in December of last year and then initiating a quarterly dividend program with the first dividend to be paid out in May of $0.14 per share. And as Dean said in his prepared remarks, that we plan to return additional capital before year-end, and we are comfortable with our original expectations that we provided in the market. So that would be in quarterly dividend and a special return of capital combined to be in line with what we have shared before. In terms of your question about share buybacks, it's definitely something that we are considering. So we would go through kind of traditional finance 101 analysis in terms of where our shares are trading, how does that compare to our view of the intrinsic value of our business. And then our unique situation, also taking into account our total float and what do we need to think about on that front before we decide what is the right form of capital return between special dividends or share buybacks or a combination of two. So that's definitely something that we are taking into account and discussing with our board as well as with our majority shareholder, Genworth Financial.

Our next question will come from Ryan Gilbert from BTIG.

First question, I wanted to go back to the comments on purchase originations. And I guess your expectations for robust purchase origination market in '22, scoring that up against the sharp increase in interest rates that you talked about, MBA purchase applications down 6%. I guess, is the basic idea that constrained inventory as well, which can limit unit volume, is the basic idea that home price appreciation is robust enough that it can offset any decline in unit volume that we might see? Is that how you're thinking about purchase originations for the balance of the year or do you think unit volume can be up as well?

Ryan, that's certainly a key factor for us. It's a great question regarding the analysis of purchase dollar volume. Our market forecast for purchase originations remains estimated between $1.7 trillion and $1.9 trillion. Part of this projection is influenced by rising home prices and higher average loan amounts. On a unit level, we maintain an optimistic outlook, as the fundamental trend for homeownership has been robust. In the past, we've reported on the anticipated number of individuals reaching the average first-time home buying age of 33 within the next four years, from 2022 to 2026, which is expected to be higher than in the previous four years. We believe there are strong trends driving this demand, and despite rising interest rates, the consumer balance sheet and labor market remain solid, which creates a favorable environment. Nevertheless, the ultimate housing market dynamics will depend on the 30-year mortgage rate for the remainder of the year and how it stacks up against home price appreciation, inflation, and wage increases. You make a valid point that we could see a larger market than the 2021 purchase originations, and this could be influenced by home price appreciation compared to unit volume.

My second question is on new DQs and I know the in 1Q, they're trending in line with I guess, normal loss patterns. And as we move into the rest of the year, just given higher levels of macroeconomic uncertainty, how are you thinking about the trend for new DQs and anything that we as analysts or that investors should be considering on that line?

I think we described the increase. We had about 400 more delinquencies sequentially, they're up about 5%, driven largely by the new large book years, the ones Rohit referenced 2020 and 2021, which represent a significant concentration in our overall portfolio. Those books continue to age and go through their normal kind of loss development pattern. Our expectation that, that doesn't stop in Q1. They're going to continue to generate delinquencies as they continue to age through that kind of peak part of loss curves, that probably doesn't peak until years 3, years 4, something along those lines. So I think there's probably still some room to go for those book years. I think it will be interesting to see how the combination of both those large books intersect with some of the smaller books that are producing fewer and fewer new delinquencies. So you have in the first quarter of 2019 in earlier books producing fewer new delinquencies. It's just simply the weight of those was overwhelmed by the concentration in the 2020 and 2021 book years. So I don't think there's anything that I could give you in terms of guidance on trend that's different than what we provided probably in our prepared remarks that we have large books. They're continuing to age through normal loss development pattern, that's probably going to continue as we head into the remainder of 2022.

And I'm not showing any further questions in the queue. I'd like to turn the call back over to Rohit Gupta for any closing remarks.

Thank you, Victor, and thank you all. We appreciate your interest in Enact and look forward to speaking with you throughout the year. Have a good day. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.