MGIC Investment Corporation (MTG) Earnings

Management highlights

- Financial Performance Highlights - Generated solid Q2 2026 results driven by a disciplined business strategy, strong credit quality, and consistent execution, with long-term value creation for shareholders as a core priority. - Favorable loss reserve development of $43 million in the quarter, driven by better-than-expected cure activity on 2025 delinquencies, maintaining a 7.5% initial claim rate assumption for new delinquency notices. - Capital position remains robust with $6 billion in balance sheet capital, supported by a well-diversified reinsurance program that reduced PMIRES required assets by $3.1 billion (approximately 52%) at quarter-end. - Capital Return and Dividend Actions - Prioritizes prudent in-force insurance growth over capital return when market opportunities exist; when growth is constrained, returns excess capital to shareholders. - In Q2 2026, paid a 15 cent per share common dividend and repurchased 6.6 million shares for $177 million; over the prior four quarters, total share repurchases hit $746 million and total dividends hit $135 million, representing a 124% payout of cumulative net income over the period. - The board approved a quarterly dividend increase to 17 cents per share, marking six consecutive years of dividend increases with a 19% compound annual growth rate over that period. - Operational and Strategic Updates - Completed a new traditional excess of loss reinsurance transaction providing up to $168 million in protection for eligible 2027 NIW, continuing to expand the program to reduce loss volatility and improve capital flexibility at attractive costs. - CEO Tim Mackey assumed the role of chairman of industry trade association USMI, and will lead industry engagement in ongoing housing policy discussions informed by data and decades of economic cycle experience.

Guidance

- Full-year 2026 operating expenses are now expected to land toward the low end of the prior guided range of $190 million to $200 million, reflecting ongoing disciplined expense management. - In-force premium yield is expected to continue following the same gradual downward trend observed over the past two years, supported by expected high 2026 persistency and MI origination volume similar to 2025. - Seasonality is expected to drive an increase in delinquencies in the second half of 2026, consistent with the ongoing gradual credit normalization trend that has persisted over the past three years. - Share repurchase activity will continue at its current steady pace, aligned with approximating net income generation in the current low-growth market environment; a new repurchase authorization reflects continuity, not an acceleration of buyback activity. - The overall mortgage origination market is expected to remain at its current modest size for the foreseeable future, with a stunted refinance market due to elevated interest rates and limited overall growth from the lock-in effect and stretched affordability.

Segment performance

MGIC reports consolidated results for its core mortgage insurance business as a single operating segment. In Q2 2026: net income totaled $182 million, or $0.86 per diluted share, compared to $0.81 per diluted share in Q2 2025. New insurance written (NIW) was $18 billion, an 8.5% year-over-year increase and the highest NIW since Q3 2022. End-of-quarter insurance in force reached $305 billion, up 2.6% year-over-year. Investment income was $59 million, with a 4% book yield on the investment portfolio. Underwriting and other expenses were $46 million, down from $52 million in Q2 2025. Annualized return on equity was 14.5%, book value per share was $24.27 (up 10% year-over-year), the count-based delinquency rate was 2.37% (up 16 basis points year-over-year, 43 basis points below Q2 2019), in-force premium yield was 38 basis points, and annual persistency was 83%.

Risks & headwinds

- Forward-looking statements about future results are inherently uncertain, and actual outcomes may differ materially from expectations due to a range of market and credit factors, as disclosed in MGIC's recent 8-K and 10-Q filings. - Elevated interest rates and high home prices stretch housing affordability, limiting potential growth in new origination volume and keeping the refinance market suppressed. - Delinquency rates are gradually increasing as part of ongoing credit normalization after the unusually low delinquency and claim rates seen during the COVID-19 period, though current rates remain well below pre-pandemic (2019) levels. - Competitive market pressure has driven a gradual downward trend in gross premium yields over the past several years, though the decline has been gradual and not unexpected.

Analyst Q&A

• Q: With the year-over-year delinquency rate increase in line with prior guidance for credit normalization, can you provide color on regional or vintage trends to inform future credit expectations? What is the outlook for cure rates and ultimate claim rates post-COVID? /

  A: Management reports no meaningful differences in delinquency mix across regions, home price environments, or credit segments beyond the natural roll forward to more recent vintages, which is expected. Ultimate claim rates on new delinquency notices remain well below the 7.5% initial assumption: fully developed vintages from 2-3 years ago have 2-3% ultimate claim rates, while more recent vintages are only trending slightly higher, so ongoing favorable reserve development is expected.

• Q: What competitive trends are impacting gross premium yields, and how does the new traditional excess of loss reinsurance compare to ILN market transactions? /

  A: There are no material changes to competitive dynamics this quarter; the slight downward tick in premium yield continues the gradual trend of the past few years with no steepening of declines. Traditional XOL and ILN serve different program roles: the new XOL covers 2027 forward NIW, while ILNs cover existing warehoused in-force loans and carry higher fixed costs and stricter size requirements. MGIC intends to operate programmatically in both markets.

• Q: What is MGIC's view on current housing fundamentals, industry NIW for 2026, and is MGIC changing underwriting posture at the margin? /

  A: 2026 NIW is consistent with prior expectations, with the purchase market growing slightly year-over-year to its highest level since 2022, while refinance activity remains stunted by high rates. There have been no meaningful underwriting guideline changes recently; the business mix has been stable, with only a slight market-driven decrease in high DTI lending, and management sees no need for adjustments given current performance.

• Q: Is there an upcoming cancellation cliff for pre-2022 in-force policies as loans hit the 78% LTV threshold for mandatory cancellation? /

  A: Most lower LTV pre-2022 loans that qualify for cancellation have already canceled, leaving the remaining in-force book concentrated in higher LTV loans. Only ~5 percentage points of annual persistency decline comes from mandatory HPA cancellation, a rate that has held steady for years, so there is no expected sharp cliff event, only gradual steady attrition that is already embedded in current persistency projections.