Q1 2020 Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the M. Gee I see and Detested Corporation first quarter earnings call. At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session do we need to press star one on your telephone.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to Mr., Mike Zimmerman. Please go ahead Sir.
Thank you.
Good morning, Thank you for joining us this morning and for your interest.
That's the corporation.
Joining me on the call today to discuss the results for the first quarter 2020, or Chief Executive Officer, Tim Mattke, <unk>, Chief Financial officer nascent goals.
I want to remind all participants in our earnings release of this morning, which may be accessed on MD Eightys website, which is located at MTG dotcom guaranteed dot com under newsroom includes additional information about the company's quarterly results that we will refer to during the call and includes certain non-GAAP financial measures.
We have posted on our website a presentation that contains information pertaining to our primary risk in force and new insurance written and other information. We think you will find valuable.
I also want them I remind listeners that from time to time, we may post information about our underwriting guidelines and other presentations or corrections to pet presentations on our website that investors and other intra interested parties may find valuable as well.
During the course of this call we may make comments about our expectations of the future actual results could differ materially from those contained in these forward looking statements.
Additional information about those factors, including cobot 19 that could cause actual results to differ materially from those discussed on the call are contained in the form 8-K, and Penn Q that was filed last night.
The company makes any forward looking statements. We are not undertake no obligation to update those statements in the future in light of subsequent developments further no interested parties should rely on the fact that such guidance or forward looking statements. Our current at any time other the time of this call or the issuance of the form 8-K or 10-Q.
At this time I will turn the call overdone, Tim Mattke, our CEO, Jim Thanks, Mike and good morning, everyone.
I want to start by saying that I hope, everyone, who is listening is safe and well.
Next I want to express my gratitude and admiration to my fellow in JC coworkers and their families. You efforts day in and day out over the last several weeks to support our customers your local communities and your fellow coworkers well coping with your own personal circumstances. This was always to find a culture of FDIC. So thank you.
The safety health of our coworkers and their families as a responsibility I do not take lightly on a Friday afternoon in mid March we made the decision to transition or operations to a remote work environment certain team said operator remotely for some time, what does that does it only occasionally and typically for weather related event, but by the Monday following our decision nearly the entire organization.
A lot of down remotely and was standing by ready to serve our customers I'm proud to say that empty I see us continue to serve our customers every day since then as well.
If we're at the side of our resiliency working remotely a slowly becoming a matter of routine as we adapt to the current environment.
In addition to the health and safety of our employees as we navigate through the current environment. We are focused on one continuing to provide critical supports the current housing market and to positioning our company prosper over the long term.
We strive to achieve those goals by among other things working with the Geo season, Servicers on loss avoidance programs offering competitive products and services to our customers and maintaining a sharp focus on the sources and uses of our capital.
We think this is the best approach for all stakeholders and is particularly relevant as we've managed through the current situation.
More on the future in a minute, but first I want to spend a few minutes, providing a high level summary of our financial results for the first quarter and our current financial position.
The nasal covers more details of the financial results.
During the first quarter, the favorable new business and credit trends, we'd experienced for the last few years continued our insurance in force increased approximately 6.7% year over year and number of loans delinquent declined.
GAAP net income for the quarter was $149.8 million.
Losses incurred as typically what creates the variability in our results in any given period the favorable activity of nude delinquency notice activity and cures. A previously reported notices continues in the first quarter.
However to reflect the current environment, we did make some modest changes to our loss reserve estimates that need to will cover in more detail.
From a new business perspective through April our current pipeline of applications remain robust the.
The combination of our applications lender reports and the MD indices provide us with reasonable visibility intent I w. over the next couple of months.
However, although our current pipeline remains robust theres considerably less visibility regarding the future business, especially in the current environment.
Discussions with lenders as well as the most recent MB application index data. Despite the risk recent increases point to a meaningful contraction in purchase application, while refinanced transactions remain out more than 200% year over year.
Given the high level of activity to date and the uncertainty of when purchase activity will fully recover and the ultimate sides of the refinance market. It is still too early to draw any meaningful conclusions about the full year impact on new insurance written persistency and insurance in force growth.
We expect that the increase in unemployment in economic uncertainty, resulting from initiatives to reduce the transmission of coal the 19, putting shelter in place restrictions will negatively impact our business.
In the current environment because of many uncertainties pertaining to covert 19, as we discussed in our risk factors in the 10-Q is very difficult to confidently forecast the impact to our financial results and capital position.
However, as we enter this period of uncertainty with a book of business that is of high quality with low delinquencies and were supported by a balance sheet that has a lower debt to capital ratio nearly $6 billion investment portfolio contractual premium flow and a robust reinsurance program.
We estimate at the end of March we had approximately $1 billion in excess of the minimum required assets that are required by the private mortgage insurance eligibility requirements or p. Meyers of the Gses Fannie Mae Freddie Mac.
We also at $2.8 billion in excess of the minimum state capital requirements.
During the quarter, we repurchased 9.6 million shares of our common stock while there is $291 million remaining under the authorization that expires at the end of 2021, and approximately $563 million of cash and investments at the holding company.
Due to the uncertainty surrounding coven 19, we have temporarily suspended share repurchases.
During the first quarter, we receive fewer new notices from the same period last year for reflecting the current environment, we used a slightly higher claim rate on those notices.
Not surprisingly delinquency notices received in April increase from the number received in March we anticipate that more significant increase will occur in may and June, especially in light of the reported forbearance rates on GST loans over the past several weeks.
As a result, we expected losses incurred will increase as as well our p. Myers minimum required assets.
The magnitude of any increased loss incurred will be a function of the number of notices received that eventually result into claim paid.
Understandably there are a lot of questions about potential impacts to our business caused by the call. The 19, notably the potential for higher incurred and ultimately higher paid losses.
Unfortunately today, we do not have sufficient data available to address some of the level of confidence we would like with that let me turn it over to Nathan.
Thanks, Tim.
I will spend a few minutes talking about the first quarter and then we'll turn to some of the uncertainties that Tim mentioned.
In the first quarter, we earned 149.8 million of net income for 42 cents per diluted share, which compares to $151.9 million net income or 42 cents per diluted share from the same period last year.
Net premiums earned increased 4% compared to the same period last year, which was primarily driven by two factors.
First insurance in force was higher although this was partially offset by lower average premium rates on that insurance in force second accelerated premiums from single premium policy cancellations increased 6 million increased from 6 million in the first quarter of 2000 $19 million to $18 million in the first quarter of 2020, reflecting the strong refinanced.
Market.
Net losses incurred were 61 million compared to 39 million in the same period last year.
In the first quarter of 2020 receives approximately 9% fewer new delinquency notices than we did in the same period last year.
The estimated claim rate on new notices received in the first quarter of 2020 was 9%, which is higher than the 8% rate that we use the last several quarters, reflecting some level of uncertainty given the current macroeconomic environment, especially for borrowers that were delinquent before the broadest impacts from the covered 19 pandemic.
Over the past several quarters, we had record and favorable reserve development, including 31 million favorable developments in the first quarter of 2019.
In the first quarter of 2020 are re estimation of reserves on previous delinquencies resulted in 3 million of adverse loss reserve development.
In the first quarter of 2020, we also increased our incurred but not reported or in our reserve from 22 million to $30 million.
The number of loans in our delinquency inventory remains near 20 year lows and decreased in the quarter.
Reflecting the low level of the delinquency inventory and improved cure rates.
The number of claims received in the quarter declined by 21% from the same period last year.
Primary paid claims declined 19% from 57 million to $46 million.
We would expect claim payments to slow over the next few months due to the foreclosure moratoriums that are in place.
The net premium yield for the first quarter of 2020 was 46.6 basis points.
Net premium yield has several components the largest component is what we call. The in force portfolio yield, which reflects the premium rates and affect our insurance in force.
The components of the net premium yield are detailed in today's press release.
We continue to diligently monitor net underwriting and other expenses, which before ceding Commission totaled 56 million in the first quarter of 2020.
The material portion of the year over year difference is related to certain expenses tied to our stock price.
During the first quarter EMG paid a total of $390 million and dividends to the holding company.
Im JC has not planning to requests from its regulator to Wisconsin OCI.
Our dividends to be paid to the holding company in the second quarter.
Future dividend payments from Jesse to the holding company will be determined on a quarterly basis in consultation with the board and after considering any updated estimates about the length and severity of the economic impacts of the covert 19 pandemic on our business.
We also asked the Wisconsin OCI not to objects perform Jesse pays dividends to the holding company.
As Tim mentioned during the first quarter, we repurchased 9.6 million shares of our common stock for a total cost of $120 million.
We have approximately 291 million authorization remaining under our $300 million share repurchase program, which runs through the end of 2021.
However, due to the uncertainties surrounding the KOVA 19 pandemic, we have temporarily suspended repurchases.
As disclosed as previously disclosed the board declared a cash dividend of six cents per share payable on May 29.
Any future dividends will be determined on a quarterly basis and approved by the board.
As of April Thirtyth, we have approximately 545 million of cash and investments at the holding company.
Our next debt maturity as an approximately three years and our interest expense is approximately $60 million per year of which $12 million gets paid to EMG.
At quarter end, our consolidated cash and investments totaled 5.9 billion, including the cash investments at the holding company.
Investment income increased year over year, primarily as a result of a larger investment portfolio.
The consolidated investment portfolio had a mix of 80% taxable and 20% tax exempt securities a pretax yield of 3.1% and a duration of four years.
The net unrealized gain of the portfolio was 175 million at December 30, Onest 2019, 83 million at March 30, Onest 2020, and 142 million at April Thirtyth 2020.
At the end of the first quarter, our debt to total capital ratio was approximately 17% and MJ sees available assets for P. Myers purposes totaled approximately $4.3 billion, resulting in a 1 billion dollar access over the minimum required assets.
I realize many of you want to know primarily for thinking about future GAAP results, what delinquency rate, we expect during the duration of this crisis and how we will establish the claim rate and severity factors that we use to reserve for expected claim payments. So I wanted to spend a couple of minutes addressing those questions.
Our process will be grounded in the same process, we consistently used to establish loss reserves over the next several months, we will monitor the level of new notices received the level of delinquencies cured the uptake of forbearance plans and current and expected economic activity.
Than using that data, we will established reserves that reflect our best estimate of the ultimate loss on both new and existing delinquencies.
Ultimate losses are those items that we expect to result in my claims and our net of expected carriers, including cures due to successful loan workouts. After a forbearance period is over.
Increased delinquencies are expected to begin in the second quarter. Therefore, when we report our second quarter results. We will have the benefit of observing the actual loan activity for the next few months the impact of the various forbearance programs as well as changes in employment in general economic activity. These are.
Surveys patients will be very informative as we established claim rate and severity factors over the next few months.
Under the cares act and programs initiated by the Gses borrowers experiencing a hardship during the covered 19 pandemic may obtain a payment forbearance for up to 360 days.
While current loans that initiate a covered 19 related forbearance are not reported as delinquent for consumer credit reporting purposes. If the borrower does not make payments during the forbearance period, they will be treated as delinquent for the purposes of the Pmires. They are reported to us as such from loan Servicers.
Pmires generally require us to maintain significantly more minimum required assets for delinquent loans than for performing loans.
The P. Myers required asset factors for delinquent loans are based on the number of missed payments and whether a claim has been received the P. Myers provides for those factors to be reduced on loans that are reported delinquent better in a FEMA declared major disaster area.
Specifically this reduces the minimum required asset charge by 70% for at least 120 days from the initial default date and longer if the loan a subject to a forbearance plan that is in a state where the FEMA major disaster declaration provides for individual assistance.
Currently we estimate that approximately 90% of our risk in force is located in FEMA designated disaster areas with individual assistance.
We expect that Servicers, we'll be reporting a delinquent loan that is in forbearance to us just as they are required to do for the Gses.
This results in a smaller incremental capital requirement for each new delinquency.
However, because we cannot predict the number of delinquencies that will occur in or how long. They will persist cannot currently estimate the increased amount of minimum required assets, we will be required to hold as a result of the KOVA 19 pandemic.
This estimation exercises further complicated for future periods as assumptions need to be made about a number of items, including the level of new business written them persistency.
In the portfolio supplement posted to our website.
We've provided an illustrative example of the level of incremental delinquencies that are current access of available assets over P. Myers minimum required assets could have absorbed on a pro forma basis as of March 30 Onest.
Making certain assumptions in order to simplify the analysis on a pro forma basis. It would have taken approximately 235000 incremental delinquent loans to consume the $1 billion access available assets that existed at March 31, and.
During the quota share reinsurance and assuming all incremental delinquent loans receive the 70% reduction for FEMA declared major disasters.
With that let me turn it back to Tim.
Thanks Nathan.
Before moving to questions. It is clear that the last couple of months of change nearly everyone's personal and professional agendas and objectives that includes the regulatory and political topics we normally discuss.
Nearly all the attention in Washington, DC that was centered on housing reform has been temporarily paused and retention at turn to how to keep the housing finance market functioning at occurrence and post KOVA 19 world.
We expect to the GRC capital rule, the re propose QM rule, including a GST patch in other reviews by the FHLB of GFT activities will all be delayed for some period of time.
The government reaction front significant number of actions have already taken to help of the American consumer economy, rather crisis.
These actions include among other items direct payments to consumers the paycheck protection program to enhance unemployment benefits.
On the mortgage front the Geo season, some lenders have taken a number of steps E certain origination guideline, while appropriately tightening others.
Nearly all the changes the gses have put forth are either supportive of making a refinance easier to complete which improves the borrower's ability to pay for supportive of ensuring the borrower's ability to pay on a purchase transaction is sustainable.
On the servicing side, the geographies and the cares act suspended for closures for at least 60 days and make available loan forbearance programs for borrowers experiencing credit financial hardships.
These forbearance programs can last up to 12 months and at that point a loan workout for modification can be completed as appropriate which brand alone current.
We believe these programs much like the GRC programs for Hurricanes and other natural disasters are designed to help borrowers that void adverse credit applications and for closure, while they are temporarily unemployed as a result of the disaster.
Historically with hurricanes or other natural disasters. These programs are very successful and most borrowers who entered a forbearance plan. We reported current several months later as a temporary hardship ended of course, our nation has never seen a dramatic reduction to the economy in such a short period of time like is occurring now.
As Nathan discuss these programs have p. Myers implications and we and all the other mortgage insurers are engaged a constructive discussions with the federal housing Finance agency and the Gses to gain more clarity about the application of P. Myers on a longer term basis, including the requirements to continue to reduce the minimum required assets for loans and forbearance by 70% as well as the.
Implication of several other provisions of P. Myers and the current environment.
While other market options for credit enhancement are unavailable our industry in our company continue to provide credit enhancement solutions to lenders borrowers and the Gses.
While our priority is working on prudent solutions and responses to the current environment. We continue to be actively engaged in housing discussions and policies and we continued to advocate for and remain optimistic that the changes do occur will include the use of private capital, including private EMI.
Long term, we still remain encouraged about future all that our company industry complaint housing finance that continues to be difficult to gauge what actions may be taken in the timing in the any such actions as a result of coal the 19.
Private mortgage insurance offers many solutions and a great value proposition for lenders and consumers to overcome the number one buried homeownership a down payment.
We entered this period of uncertainty with a book of business because of high quality and low delinquencies and we are supported by a balance sheet that as a low debt to capital ratio nearly 6 billion dollar investment portfolio contractual premium flow in a robust reinsurance program.
In closing as I mentioned at the beginning in my remarks. In addition to the health and safety of our employees. We are focused on continuing to provide critical support to the current housing market and positioning our company to prosper over the long term.
I want to remind listeners that our company was founded in 1957, we have successfully navigated many economic cycles of continually provided borrowers and lenders for the affordable imprudent low down payment options.
Im confident that we underwrite team in place to navigate through this period of uncertainty and we'll continue to deliver the quality products and service our customers have come to expect from Njc.
With that operator, let's take questions.
For the reminder, further questions. Please press star one of your telephone keypad once again less star one.
And your first question comes from the line of Jackman single G.
Hi, good morning, everybody well hold on these new as well.
Ladies and going back to the.
Illustrative example.
Let's talk about 200.
35000 be keys, I guess, that's about a 22.3 key raise on where the portfolio stands today.
When I when you talk about the available collection.
Are you assuming that those people respond so those would speculate grew the two to three four to six to six plus bucket over.
Over time or is that one point in time.
Well I will support all those questions. Thanks.
Yes, thanks to the question.
It is and I think we did try to footnote on the assumptions that does that assume that all incremental delinquent loans are in the two to three miss payment bucket. It was really meant to be a kind of at a point in time view as opposed to something more overtime.
Got it Okay and then.
I guess with the segment or and the negative.
Development.
You can't handle time, I know Youre limited accounting rules.
What was the need to 9%.
Claim rate assumption can you remind us what that was around Hurricanes and then maybe lastly, what your claim rate assumption, one or wall directional drilling rigs, maybe where were 740 plus FICO business.
In being sort of a leader ballpark.
Yes, I can they can certainly take the hurricane related part of that question first here.
We have use lower claim rates on hurricane related notices in the past.
Claim rates in that 3% to 4% range.
In terms of specific ultimate claim rates on delinquent items are cohorts from the crisis I don't I don't have that directly in front of me.
But I think we did experience on an overall basis claim rates higher than than the certainly the eight or 9% that we're using today.
But I don't have a precise number for you.
Okay. So then just one more for me.
The increase year over year in and I don't like we get a little bit more.
Reply as well, we do a 35% reside.
Anything there was up maybe against an easier comp a year ago.
Yeah, just some color, though because I think your European growth rate was pretty well in excess of the other symbicort and so far.
Yes, I mean, I don't think anything I mean, I think obviously a little bit from a cost standpoint, you know as we look to deploy our capital and when the business, where we think theres a good risk return.
That can move around quarter to quarter.
And so I don't know I don't tickets any conscious trend lets data to target.
Specific segments, there versus just as we look at sort of what the right risk return as.
We're very happy with what we were able to acquire from an idle during the quarter.
Okay got it doesn't sound good luck.
Thanks.
Your next question comes the line of Bose George.
Good morning.
She going back to that slide eight.
The just when you look at your capacity to 23.
3% switching out there.
Capital at the holding company is.
Incremental to that right. So I mean like a pro forma number we can I assume that capital as well.
Well.
Thank you with both of those numbers.
This is Dave and yes, that's correct that pmires excess represents the the funds that are.
And EMG IC today. So it doesn't include any.
Any of the funds at the holding company. The other the other thing I would point out. We also have him J.C. has subsidiaries with.
Approximately 300 million of capital that that are not counted in that pmires access as well. Although it is included in our in our statutory capital.
So from a levers to increase that certainly have more than just the holding company.
Okay. So when do you think about the availability to.
Across key explores the 360 odd at the holding company plus this 300 million subsidiaries.
Yes.
Yes. Both said this is my guess immediate technically yes, thats right I mean, I think you've got to be somewhat cautious when you know contributing holding company the holding company has obligations.
Right. So you can't assume that all capital is available to all that cash is available. There certainly there is interest carry and so on so yes, but on a tactical basis you are correct.
Yes, Okay, great. Thanks, and then actually just wanted to ask about.
Pacing in the market.
As a product.
Price increases.
You guys eating more.
The CLO.
Mike.
Yes, It did 10 I'll take that.
As we look at premium rates as we always do you know we consider the credit mix, what our loss expectations are in the capital charges, we asked to hold against that business. We right. So you know accordingly, we did change react to the change conditions and depending upon the risk characteristics alone. We did increase our premiums probably approximately somewhere 10.
To 50% within our risk based pricing engine and like you know that approximated probably about 50, 560% of our business as a 331.
Okay, great. Thank you.
Thank you.
Your next question comes at a line of cigarettes come on Tony from call at this point.
Everyone.
Nick Nathan.
Of the 463 million of remaining aisle and coverage how much of that.
Reduces the minimum required available assets under P. Myers.
Yes, I think.
Maybe I'll I'll answer the question a little bit differently I'd, maybe just give you. The number that is they don't have the the the.
The number that I think you're asking for there, but the number that.
The difference between the amount of island outstanding and the credit that we get under Pmires as of 331 was about $26 million.
Okay.
That's very helpful.
And.
From an accounting standpoint.
Completely understand guessing the right default to claim for these for balances will be really difficult.
But as we progress how do you will evaluate whether or not you have to true up that initial.
Estimate to your meaning the programs can borrow six months so for berenson up to 12 months automatic extension. So it strikes me as the aging others delinquencies is kind of a relevant to that comp until until the forbearances over so is it primarily just macroeconomic changes underlying the model or yeah.
How does kind of the development factor.
His view versus your initial estimates.
Yes, Nathan ill take that one.
Yes, I do think Theres, a lot of uncertainty as to whether people that enter forbearance plans will kind of automatically not make six payments I think we've we've seen some data points that indicates that even after people are entering forbearance they are still making payments.
So I guess that would be one thing that overtime, we will certainly have more information on what is the.
What does the aging look like and I think even my initial reaction was that people will automatically go for the full six months or full year, but I think the early data would indicate that that new may not be the case.
I think I think the point about aging being not as relevant for forbearance loans than non is certainly a factor that overtime. We will we will have to think about how to appropriately reflect that.
But I do think that you're correct that it's certainly different.
You know what that ultimately means for us in terms of.
Developments or claim rate picks out into the future Oh I think there's just there's a lot of uncertainty.
Okay.
And then on.
[music].
The amount of capital you have to handle forbearance delinquencies is very high.
Yeah at least from what we know today, we're birthrates arc.
Have you changed your NPW targeting in any way that focuses specifically on called the new performing pmires load or is it still focusing your took your targeted focus is just trying to do the most business, where you think the best economic returns.
Chris This is Tim I think you know.
It it so it's the latter right and we arent if that's what I read into your question sort of the first part was are we somehow trying to.
I guess control the amount of Nhw, we write to conserve amounts of capital I think it that's not the case. So we are very focused on the risk return and deploying capital where we think we can get the appropriate returns and that's sort of our that's where we are currently.
Expectation, that's where we're going to be.
But field that that's the equation that we've been dealing with for for a while and expect that's going to continue.
Alright, perfect. Thank you so much until I have.
Thanks.
Thank you next caller is my here [noise].
Hi, Thanks for taking my questions and I hope, everyone say Christian hosting.
One of the spot going back on.
Kevin and forbearance, Greg I guess within the first question I had was just wanted to get a better understanding how much data do you actually yet in terms of what is coming so does the service that though you, but he be loans I have gone into fallback units. They are not prepayments and liquids or is it.
No no damage delinquent, so you kind of just out react.
How much lucky.
Okay.
And while it is our out of noticed yet.
This is Mike Faldo rise, a little choppy rate up but as far as the reporting from service or zero. There right. So let's just start kind of the survival is going to the flow on them on a monthly basis. So late in each month, we receive files from Servicers up sell for example in the in late April We received files says that reveal.
To us loans that were delinquent missed that our March 1st in April Onest payment and then that's what triggers to delinquency reporting to as alright, that's kind of standard fare.
Included in the reporting that comes to US is that they like they do with the GSV. They need to report loans that are either what is the delinquency status with the reason for the delinquency is it in Forbearances is not as for variances within a repayment plan it all.
The dairy is coty now a lot of that we do rely upon the servicers to get that end.
So the recording will come in but.
You tactic, we rely on the Servicers to do that information. So we will we do expect to receive it coming in.
Servicers along with the EMI industry, along with the June needs have been working together to make sure that the coating gets recorded appropriately.
And so we do expect receiving coming in we have not received much information to date right. These are gone we expect an increasingly going forward. We have received some very limited data.
Through the month of April.
That insight.
Consistent somewhat with the forbearance rates that we've seen.
In reported in the press bye.
MBK surveys black Knight data.
What I would caution say that it it's what we know we don't know of that in all inclusive of number because we're only getting recorded.
Loans that are delinquent. So for example of alone is current and entered into a forbearance Brad It will never be reported to us. If it continues to make those payment because it's not a past due and won't need the trigger for reporting purposes. So hopefully that's responsive to whats your question.
Oh, yes, no actually on that last one if I could just clarify so so just sorry, you Bob if I make my you know that's it.
Oh borrow makes that much beam and then corbett happen they caught their proactive they called it so that though they enter into a forbearance plant and then they miss that April and may be but would that that bar rule would still be considered delinquent right in June.
The loan we would expect that loan to be reported to us do for April 1st.
We want to get that file in June and we own it might that be reported delinquent told us yet okay.
Alright, I know that don't have what I want to pointing out the arrow that they made their april 1st payment.
They made the March 1st payment entered into in Forbearance, and then may or April 1st payment, we would never see but they're in a player expansive accepted that wouldn't that be reported delinquent doing okay. No understood understood. Thank you know that is that can be helpful and clarifying well and then just one other question in terms of your reinsurance spend than what you're seeing.
In terms of the island mosquito, even QSR I guess, you just entered one but.
Just wanted to make sure you're what you'll see embed any comments you have thank you.
Yes Nathan.
Yeah, you mentioned, our quota share program we did.
We do have a 30% quota share covering the majority of our 2020 business I'm in terms of the I'll end market I think what we've always said is that we would like to be programmatic issuers in that market when it when it makes sense right now I.
I think.
Market is really distressed still you know really the I'll end market has always been I would view it as a subset of the G of the GRC CRT market.
So when the GRC CRT market opens back up for primary issuance I think that will be the first positive indicator for for potentially future, Iowa and issuance out of the mice space.
Understood. Thank you those are my question. Thank you.
Thanks.
[laughter].
HM.
And caller please introduce yourself.
Hi, Adam Star Gulfside asset management.
You are you still collecting premium on loans that are in forbearance, oh, whether they're delinquent or not.
Hi, Adam it's Mike good to hear from yes.
Yes, we we do continue to receive premium and we would expect to continue to receive premium.
From the.
On on all policies, whether their current or delinquent.
Now end us as a reminder, though just as a reminder, though once the loan goes delinquent our master policy does not we submitted the delinquent the events occurred the servicers are typically not obligated our policy, but they are obligated under the G fees to advance that premium ability.
But as it as we do get paid premium on delinquent loans, we set up of reserve.
Based on estimated claim rates for our refund of that premium back. So we don't count delinquent premium that we expect to be patio associated with claims.
As for as revenue.
You get the cash, but you don't accruing in their earnings you offset it.
Correct.
Thank you very much.
And wishing you all the best in appreciate you're doing the call.
Thanks, Adam you too.
Your next caller is a winston from pilot advisor.
Hi, Thank you and following up Adam's question I was curious if you could give us some.
Sense of the cash collections of premiums, saying for April compared to.
January or February you'd actually cash coming into the into Mg I see from the premium.
Yes. This is Nathan we didn't notice.
Any really meaningful change month over month as we looked at January to February to March to April and there's a little variability with just single premium policies.
Because obviously that premium is all paid upfront, but in terms of the renewal policies that I think our are kind of the focus of the question.
That's a that's something that we just haven't seen really any any change in.
So basically the mortgage services for the most quite a reasonably healthy is what you see.
No.
This is Mike I want to say just reiterate what I wouldn't want to make any statement about others, but we're leaving the gashes as Nathan described.
Thank you very much.
Mm Hmm.
Oh.
Your next question comes from the line.
Sam Choe.
Great. Thanks.
Hi, guys I'm on for Doug today, So I just wanted to ask one oh itself earlier questions and more about broader sense. So when you're thinking about like the 2017 Hurricanes and other natural disasters.
How are we like what are the key takeaways that we should be thinking about whether its credit related and operationally.
I guess it tend to just a I mean, the way I you know we've addressed a little bit in the opening comments.
I think what what we learn from that is that when Theres government intervention and allowed for forbearance that there can be a pretty large uptake and that those can sort of clear up in a few months as people.
Get back their employment I think we tried to point out early on is there some similarities here and that Theres, a widespread sort of impact and unemployment and a widespread forbearance, obviously being offered until we expect there to be a large uptake I think the little bit of different here is we don't know how long the economic uncertainty will last and so I.
Take while we're all hope will that be economy gets back working and people get their jobs back very quickly and at that means that they will come out of forbearance you know within a few months and relatively quickly like they do kind of following a natural disaster. The realities. We don't we don't know that its not exact cop, but especially with the uptake in the in the and the proposed.
It was yours or into India forbearance.
We expect to see similar it's I think that's why we use the natural disasters and the hurricane as a as a starting for the comp.
Okay. Another question.
Do you guys keep track of employment statistics for your customers and if so like are you able to assure that data.
Hey, Sam it's Mike the information that we have is always at the point of origination.
Other that the FICO scores et cetera. So the short answer I guess would be no. We don't have current employment information.
Got it okay. Thanks, so much.
Thanks.
Thank you Mr. Don your line is open.
Yeah, I'm not sure if that's for me and my own. Yes go ahead, sorry, I couldn't hear the operator.
I just want to add one clarification on the analysis you put out in the footnote It says I'll answer not considered.
Is there an incremental adjustment we could also make to further refining analysis or islands effectively already in there because of the.
The benefit they have on an.
Alright, and are reflected in the billion access to Pmiers.
Jeff assays and that's that's a good point I mean, the insurance like notes are included in that billion P. Myers access certainly I think when we said not considered it was more of the additional $26 million that that Chris had asked about before which is the amount of oh idle and capacity to.
Absorb pmires, that's not currently taking as a benefit today.
So theoretically the billion 26, if we wanted to adjust as one of the Guy.
Yeah.
Round numbers I mean, the 26 million is not included in our P. Myers access.
Alright. Thanks.
Thanks, Jeff.
Your next question comes on line of feel Stephano Deutsche Bank.
Yes, Thank you Sir.
Somewhat following up from here is question earlier.
When we look and see some mostly defaults that you had reported April.
Feels like a bit of a pop in it and I guess in my mind, partially suspected maybe there's some poor between things that you're treating and.
Defaults, even though it's not technically difficult, but it feels like.
Not necessarily the case on is there anything in April did your wearable or why the reporting.
New defaults mean, it picked up and then what we saw from Q1.
I feel I think the you know I think there are likely some forbearance within the April numbers and I guess, the way I sort of think about it is.
You know there were likely people, who administer their they're march payment already before as the Kobe 19 sort of impact started to happen.
As they got to their April payments with a care attacks and things are in place.
They sort of interest forbearance, and then that meant that they and did not make their april payment and still saw that uptick what I think what we're expecting is to see more of an uptick in the may into June for people, who would have been fully current prior to covert 19, who then start to miss their payments. So I I think what you're seeing in April as people, who would have missed a payment and a lot.
Times, those will never get to us, but with with Ur Cobot 19 in sort of the forbearance and plays ended up mistake. The second payment maybe otherwise would not have mr. second payment have been reported delinquent to us.
Yes. So this is.
Sorry, now, let's try to add it to that in within that April delinquency number the best that we reported in the press release, we have gotten some reporting from some servicers and so there is a.
Proximately 2500, Forbearances of those delinquent loans have been reported to us all about 8%, but we don't know thats. The entirety of the population that did forbearance that we haven't gotten complete reporting from all services, but we have got itself.
Greetings and I guess is the right way to think about that this cohort or does that ticket.
People, who are teetering on defaulting and then the world kind of fell apart around them and it just gave them a lifeline to go into forbearance.
You know Phil.
Every family makes their own decisions and we don't have visibility in San Juan It have you know sell I, it's hard to draw those generalities our were reluctant to draw those generality I'm not saying what year hypothesis could be is incorrect, but.
But I wouldn't want to.
I guess reinforced that because we don't have good visibility into that.
[laughter] fair enough.
So my second question is and it's it's likely premature, but I wanted to talk about the contingency reserve into the extensive a loss ratios for the year got a bump 35% what's involved into consideration of.
I'm trying to access that reserve or why would you why wouldn't you how should I think about that.
Yeah, Nathan I mean, you're correct that that the way the rules work on contingency reserves is it's a loss ratio for the year as above 35% than than we can release.
That contingency reserve releases done on a on a first in first out basis, so you'd really be releasing from contingency reserves that we added and maybe the 2013 2014 that time period.
I think I view that as almost formulaic as opposed to on a judgment that we would make to release it or not it's really I'm just kind of set aside capital. So moving it from contingency reserve religious moves into surplus at that point you I think that's something that we've consistently done when when we.
I have had loss ratios that allowed us to release contingency reserves. So I wouldn't view it as something that that really there's a lot of decisioning on just something that would naturally happen. If we were in that circumstance.
Okay, I think more formulaic I thought it was a bit limited attention to it kinda understood. Thank you so much.
Thanks, Phil.
The next caller please introduce yourself.
And your line is open.
[noise] sounds like Brexit.
Okay.
Okay.
Excellent. Thank you okay no.
Okay.
Hello.
Yeah.
Oh, Hey, sorry, its March Bruce.
Hey, Mark.
Okay.
I'm sorry for the confusion.
So.
Question I have is are there any assets available to the holding company outside of the past there.
It could be used to support the writing company anything like you know committed undrawn lines of credit.
Mark This is an eighth and now we don't have a we don't have a credit facility at the holding company at this time.
Oh, sorry. This is my guys well make sure you heard the earlier comments statement made about other subsidiaries that are not that we have.
I think you mentioned 300 million that that other subsidiary Thats not in the FDIC available.
In that exit reflected in that cushion.
Yes, okay.
Okay, well I didn't hear their cloud data together.
Outside of the commitment with the holding company how much do you view is available for quick down if necessary.
But I think I mean this nathan it at this time, we're certainly you know evaluating how new notices come in but feel like with a with the things that not only the p. Myers access that we currently have and its ability to withstand large increases in delinquent loans, but also.
So you know some of the other levers that Mike mentioned with capital at other subsidiaries of 'em G. I see that would really just be upstreaming capital back to the to their parent company.
You know that gives us even more flexibility and then yeah. This is obviously will take place over some period of time and we're still generating strong cash from operations, even even in this environment, which will organically generate capital. So I think we feel like we have a a lot of lovers, what that would be Paul before we'd we'd go to the holding company.
Think about funds there.
Okay.
Got it and then.
And then are you laid out.
You could absorb okay.
You could see going to go up to 24 person and you know and how that all absorbed by your existing echo.
How do you think about whether that's I just say what would want to see you know with delinquencies really hard rising.
I have some level of cushion over and above kind of your required assets.
Mark It's Tim I I think it is something that you know we think of it I think it's it. It's a good question to ask I don't know what the exact answer is you know my view is more insurance company P. Myers are put in place to you don't make sure that a us as I'm eyes compare claims.
Obviously, the FHLB, saying Gee seized as they look and they can change p. Myers whenever they want to what they want to do is make sure. They get paid their claims and so I think I feel comfortable with sort of the thought process. We went through obviously feel good about their relationship with them and that they are being thoughtful about that.
It's really tough though to know if they would say we need to have some excess off where we are but we've always operated under the assumption that they could change pmires if the if they if they want to what they felt like they needed to I haven't received any indication to leave it to believe that the case. It all the only dialogue we've had quite frankly as an industry has been around some of the nuances of how to apply.
You know P. Myers to the current forbearance situation, knowing it's not exactly on point with where the hurricanes as long as far as how long this could be a duration for.
Okay got it thank you.
And there are no final question. So I will now I'll turn it back over to management.
Thanks, along as we close I just wanted to.
Take a take a moment to appreciate all the first responders who are on the front lines of this pandemic you know the courage is inspiring a for every while slipping into call just want to say I hope you and your families are safe and healthy and finally as we head into this weekend moderate taken early moment to wish you happy mother's day taught them.
Others out there so thank you for your interest in Jackie.
This concludes today's conference you may now disconnect.
[noise].