MGIC INVESTMENT CORP Q3 FY2024 earnings call

Key Points:

• Strong third quarter financial results with net income $200M and ROE 15.6%.
• Insurance in force at $293B, new insurance written $17.2B (+27% QoQ).
• Capital activities: repurchased 5.2M shares for $123M, paid $34M dividend; additional 2.9M shares repurchased in October.
• Housing market: constrained by supply and affordability but showing signs of easing with Fed rate cuts and lower mortgage rates.
• A.M. Best upgraded MGIC's ratings to A from A-, citing balance sheet strength and operating performance.
• Favorable loss reserve development due to strong cure rates on 2022-2023 delinquencies.
• Reinsurance program: new 40% quota share agreement for 2025-2026 NIW, and cancellation of 2021 quota share treaties.

In the third quarter, MGIC earned net income of $200 million with an annualized return on equity of 15.6%. Insurance in force ended at $293 billion, up slightly quarter-over-quarter. New insurance written was $17.2 billion, a 27% increase from the prior quarter. Net income per diluted share was $0.77, compared to $0.64 last year. The reinsurance program is a key component of capital management, reducing loss volatility and providing capital flexibility.

Forward-Looking:

• Expect share repurchases to remain primary capital return to shareholders.
• Full-year operating expenses expected $215M-$225M.
• Book value per share grew to $20.66, up 19% YoY.
• PMIERs excess level expected to decrease due to $400M dividend and reinsurance actions.

Risks:

• Uncertain macroeconomic conditions impacting housing market.
• Potential impact of hurricanes on delinquencies and reserving.
• Interest rate changes affecting reinvestment rates and investment income.

Q: Terry Ma asked about changes to static pool delinquency curves and vintage performance.

A: Nathan Colson explained updated frequency of data points, and while 2022 vintage showed marginally worse new delinquencies, cumulative cure rates remain strong.

Q: Bose George inquired about new insurance written growth and credit performance.

A: Tim Mattke stated they likely gained market share due to broad customer base and risk-based pricing.

Q: Mihir Bhatia asked about premium rates, persistency, and expenses.

A: Tim Mattke noted stable premium rates, Nathan Colson discussed persistency tied to low note rates and expenses expected in $215M-$225M range.

Q: Geoffrey Dunn asked about reinsurance profit commission threshold.

A: Nathan Colson explained book years at 63% and 62%, and shift to multiyear reinsurance due to market capacity.

Q: Scott Heleniak inquired about hurricanes' impact on delinquencies and interest rate sensitivity.

A: Tim Mattke said early to see hurricane impacts, Nathan Colson discussed new money yield and limited floating rate exposure with 4-year portfolio duration.