Enact Holdings, Inc.ACT
Enact Holdings, Inc. Income Taxes Disclosure
Income taxes
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Income (loss) from continuing operations before income taxes included the following components for the years ended December 31:
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | 744,311 | $ | 754,873 | $ | 812,383 | |||||||||||
Foreign (1) | 114,526 | 123,188 | 39,126 | ||||||||||||||
| Income from continuing operations before income taxes | $ | 858,837 | $ | 878,061 | $ | 851,509 | |||||||||||
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(1) Foreign income represents income derived from our Bermuda-based subsidiary, Enact Re Ltd., a majority of which relates to reinsurance assumed from EMICO.
The total provision for income taxes was as follows for the years ended December 31:
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current tax provision (benefit) | |||||||||||||||||
| Domestic federal income taxes | $ | 172,410 | $ | 181,433 | $ | 181,685 | |||||||||||
| Domestic state income taxes | 4,412 | 4,096 | 6,145 | ||||||||||||||
| Total current tax provision | 176,822 | 185,529 | 187,830 | ||||||||||||||
| Deferred tax provision (benefit) | |||||||||||||||||
| Domestic federal income taxes | 7,459 | 4,224 | (1,600) | ||||||||||||||
| Domestic state income taxes | 312 | 240 | (232) | ||||||||||||||
| Total deferred tax provision | 7,771 | 4,464 | (1,832) | ||||||||||||||
| Total income tax provision (benefit) | |||||||||||||||||
| Domestic federal income taxes | 179,869 | 185,657 | 180,085 | ||||||||||||||
| Domestic state income taxes | 4,724 | 4,336 | 5,913 | ||||||||||||||
| Total income tax provision | $ | 184,593 | $ | 189,993 | $ | 185,998 | |||||||||||
We had current income taxes receivable of $2.2 million as of December 31, 2025, which was recorded in other assets, and current income taxes payable of $11.9 million as of December 31, 2024, which was recorded in other liabilities.
The following table sets forth income taxes paid (net of refunds received) for the years ended December 31:
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| US federal taxes paid | $ | 185,888 | $ | 184,028 | $ | 176,703 | |||||||||||
| US state and local taxes paid | 5,027 | 4,516 | 5,269 | ||||||||||||||
| Total taxes paid | $ | 190,915 | $ | 188,544 | $ | 181,972 | |||||||||||
* There were no other taxes paid greater than 5% of the total payments in 2025, 2024, or 2023.
The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the years ended December 31:
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Pre-tax income (loss) | $ | 858,837 | $ | 878,061 | $ | 851,509 | |||||||||||||||||||||||||||||
| U.S. federal statutory income tax rate | 180,356 | 21.0 | % | 184,393 | 21.0 | % | 178,817 | 21.0 | % | ||||||||||||||||||||||||||
| Domestic federal | |||||||||||||||||||||||||||||||||||
| Tax credits | (2,654) | (0.3) | — | — | — | — | |||||||||||||||||||||||||||||
| Nontaxable and nondeductible items | 3,101 | 0.4 | 2,014 | 0.2 | 2,593 | 0.3 | |||||||||||||||||||||||||||||
| Cross-border tax laws, net | |||||||||||||||||||||||||||||||||||
| U.S. taxation of foreign insurance company | 24,083 | 2.8 | 25,981 | 3.0 | 8,133 | 1.0 | |||||||||||||||||||||||||||||
| Other | 26 | — | 48 | — | — | — | |||||||||||||||||||||||||||||
Domestic state and local income taxes, net of federal effect (1) | 3,732 | 0.4 | 3,426 | 0.4 | 4,671 | 0.5 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Bermuda foreign rate differential | (24,083) | (2.8) | (25,981) | (3.0) | (8,133) | (1.0) | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | 32 | — | 112 | — | (83) | — | |||||||||||||||||||||||||||||
| Effective rate | $ | 184,593 | 21.5 | % | $ | 189,993 | 21.6 | % | $ | 185,998 | 21.8 | % | |||||||||||||||||||||||
(1)State taxes in Florida make up the majority (greater than 50 percent) of the tax effect in this category for all periods presented.
The components of the deferred income taxes were as follows as of December 31:
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Assets: | |||||||||||
| Accrued commissions and general expenses | $ | 9,193 | $ | 8,963 | |||||||
| Capital loss carry forwards | 6,397 | 5,149 | |||||||||
| Net unrealized losses on investment securities | 6,864 | 54,108 | |||||||||
| Unearned premium and loss reserves | 31,263 | 31,861 | |||||||||
| State income taxes | 8,831 | 9,038 | |||||||||
| Other | 83 | 2,212 | |||||||||
| Gross deferred income tax assets | 62,631 | 111,331 | |||||||||
| Valuation allowance | (8,111) | (18,021) | |||||||||
| Total deferred income tax assets | 54,520 | 93,310 | |||||||||
| Liabilities: | |||||||||||
| Deferred acquisition costs | 4,638 | 4,960 | |||||||||
| Investments | 21,148 | 19,734 | |||||||||
| Other | 8,745 | 3,603 | |||||||||
| Total deferred income tax liabilities | 34,531 | 28,297 | |||||||||
| Net deferred income tax asset (liability) | $ | 19,989 | $ | 65,013 | |||||||
As of December 31, 2025, the capital loss carryforward was $30.5 million and, if unused, will expire in 2028. There were no U.S. federal NOL carryforwards.
Our valuation allowance as of December 31, 2025 and 2024 was $8.1 million and $18.0 million, respectively. Given the change in our unrealized gains (losses) on our fixed maturity securities for the
Company and consolidated tax group in 2024 due to rising interest rates and the corresponding reduction in the amount of unrealized capital gains expected to be available in the future to offset our capital loss carryforwards and other capital deferred tax assets, we recorded a valuation allowance of $10 million during 2024 through accumulated other comprehensive income (loss) related to deferred tax assets that would produce capital losses. We released the valuation allowance of $10 million through accumulated other comprehensive income (loss) during 2025. These changes are due to the decrease in unrealized losses in accumulated other comprehensive income for the Company and the consolidated tax group during the period. The remainder of the valuation allowance as of December 31, 2025 and 2024 is related to state deferred tax assets. The state deferred tax assets related primarily to the future deductions associated with non-insurance and insurance net operating loss (“NOL”) carryforwards.
Except as discussed above, we have not established a valuation allowance with respect to any other deferred tax assets as of December 31, 2025, based primarily upon projections of future taxable income. With respect to deferred tax assets associated with unrealized losses on investment securities, management has the ability and intent to execute tax planning strategies, including to hold those investment assets to recovery or maturity. We have determined that such strategies are prudent and feasible, and would be implemented, if necessary, to ensure recognition of the deferred tax asset. After consideration of all available evidence, we concluded that it is more likely than not that these deferred tax assets will be realized. If our actual results do not validate the current projections of pre-tax income, we may be required to record an additional valuation allowance which could have a material impact on our consolidated financial statements in future periods.
There were no unrecognized tax benefits as of December 31, 2025 and 2024.
We recognize accrued interest and penalties related to unrecognized tax benefits as components of the provision for income taxes. We have recorded $0 of benefits related to interest and penalties for 2025, 2024 and 2023.
As previously discussed, we have elected to participate in the Genworth consolidated return. All Genworth companies domesticated in the United States are included in the Genworth consolidated return as allowed by the tax law and regulations. We are not currently subject to any significant examinations by federal or state income tax authorities. Generally, we are no longer subject to federal or state income tax examinations for years prior to 2022.
We are part of the 2022 Amended and Restated Tax Allocation Agreement (“TAA”) between Genworth and certain of our subsidiaries. The TAA was approved by state insurance regulators and our Board of Directors. The tax allocation methodology is based on the separate return liabilities with offsets for losses and credits utilized to reduce the current consolidated tax liability as allowed by applicable law and regulation. Our policy is to settle intercompany tax balances quarterly, with a final settlement after filing of Genworth’s federal consolidated U.S. corporate income tax return.
The TAA prevents any allocation of tax to a separate company that is greater than the tax incurred on a separate company basis, subject to consolidated loss carry-forward adjustments. The total tax refund allocated to the MI Group, therefore, may exceed the consolidated tax refund received.
Separate Return Method
If during the years ending December 31, 2025 and 2023, we had computed taxes using the separate return method, the unaudited pro forma provision for income taxes would remain unchanged. If during the year ended December 31, 2024, we had computed taxes using the separate return method, the unaudited pro forma provision for income taxes would increase by $5 million due to capital losses with respect to which a valuation allowance would be established on a separate return basis.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.