Q3 2021 MGIC Investment Corp Earnings Call

November 4, 2021

Good day, and thank you for standing by and welcome to the M. G. I see investment Corporation Gwadar 2021 innings call. At this time, all participants I've been a listen only mode. After just be just presentation. There will be a question and answer session to ask a question. During the session you will need depressed Taiwan on your telephone keypad and.

Please be advised that today's conference is being recorded if you require any further assistance. Please press ties jail I would know that the hand to conference Overdo Your speaker today, Mr. Mike Zebra men. So please go ahead.

Thanks milk.

Good morning, and thank you for joining us this morning. It for your interest in MGIC Investment Corporation, joining me on the call today to discuss the results for the third quarter of 21.

Our Chief Executive Officer to Mekki, and Chief Financial Officer, Nathan Colton.

I want to remind all participants at our earnings release of last evening, which may be accessed on our website, which is located at M. P. G Dot MGIC dot com under newsroom.

[noise] clued certain additional information about the company's quarterly results that we will refer to during the call and includes the reconciliation of the non-GAAP financial measures so that those comparable gap measure.

We've posted on our website a presentation that contains information pertaining to our primary risk and force new insurance written reinsurance transactions and other information, which we think you'll find valuable as well.

I also want to remind listeners that from time to time, we may post information about our underwriting guidelines in other presentations are corrections the past presentations on our web site that investors and other interested parties may find the valuable.

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 COVID-19 that could cause actual results to differ materially from those discussed in the call are contained in the form 8-K and Form 10-Q that were filed last night.

If the company makes any forward looking statements were not undertaking obligation to update those statements in the future in light of subsequent development.

Further no interested parties should rely on the fact that such guidance are forward looking statements.

Our current at any time other than the time of this call or the issuance of the form 8-K or 10-Q.

With that I'd like to introduce him that thanks.

Thanks, Mike good.

Good morning, everyone.

I'm pleased to report that we generate another quarter of very strong financial results. After my opening remarks, Nathan provide more detail about our financial results in capital position.

<unk> before we open the line for questions I'll wrap up by discussing the current operating environment, including activities related to housing finance policy.

During the quarter, we earned GAAP net income of $158 million a.

Quarterly financial results continue to reflect the solid credit quality of our increased insurance in force a strong housing market Ah decreasing delinquency rate and improving economic conditions is more local economies returned to prepandemic levels of activity.

As we expected refinance activity has slowed however, the purchase market remains strong and accounted for nearly 90% of the 28 $7 billion of new business, we rode through the third quarter.

This level of new business writings combined with a higher annual persistency resulted in our insurance it for us increasing 2.4% to $268 billion.

12% higher than last year.

Reflecting the continued strength of the housing market purchase applications in our application pipeline bleeding indicator of NSW continue to account for more than 85% of applications received in recent months.

The last five quarters been IW, where the five biggest in our company's 64 year history. So it should not surprise anyone that we do not expect to continue writing such high levels of new business.

As we look out over the next several quarters, we expect the refinance activity or remain low and the purchase activity will lower than the records of the five prior quarters will remain robust as consumer demand for homes remains strong and interest rates. Despite rising modestly are still attracted by historical standards.

This environment combined with increasing annual persistency should allow our insurance and forced to continue to grow although perhaps a slower annual rate than we have been enjoying in recent quarters.

Look at our enforced portfolio for loss ratio was a low 8.1% in the quarter.

This result, primarily reflects the current economic conditions, the quality of our existing book a business and a low number of new delinquency notices received.

I continued to be encouraged by the quality of new insurance written and the positive trends in credit performance, which continued through October.

At quarter, and the excess of our pmiers available assets over the minimum required assets increased by $300 million to $2.6 billion in our Pmiers sufficiency ratio was 180% at the end of the third quarter.

As we discussed last quarter R capital management strategy centers on maintaining financial flexibility at both the holding company and the writing company to protect our policyholders and to create long term value for shareholders.

This failure can be creative by writing more primary mortgage insurance pursuing new business opportunities retiring debt paying dividends and Ah repurchasing stock.

We executed on the strategy during the quarter by writing 28, $7 billion, a new business and by returning nearly $180 million to shareholders through the repurchase of $10 million 10 million shares to pay the increased common stock dividend.

In connection with our strategy, maintaining capital flexibility to holding company, maintaining a target level of liquidity well in excess of our near term needs.

At the operating company it means maintaining diverse sources of capital and a pmi's efficiency ratio that will enable us to grow even in times of stress positions for changes to our operating environment.

Of course, these target levels are dynamic and changes the operating environment changes.

We believe that our holding company and writing company capital management strategy will create long term value for shareholders, while allowing us to continue to be well capitalized counterparty for our customers.

In summary, we continually look for ways to maximize nerd near term business opportunities, while remaining focused on long term success of the company and value for our shareholders.

I believe the actions we have taken this quarter and the announcer the new share purchase authorization, the Nathan will discuss demonstrate our commitment to that strategy.

We have a strong and dynamic balance sheet. We are confident are positioning in the market and we liked the risk reward equation that the current conditions offer with that let me turn it over to Nathan.

Thanks, Tim and good morning.

Tim mentioned, we had another quarter of strong financial results and.

In the third quarter, we earned $158 million of net income or 46 cents per diluted share and generated an annualized 13% return on beginning shareholders' equity.

Adjusted net operating income was $157 million compared to $150 million in the third quarter last year.

During the quarter total revenues were $296 million the same as last year.

The net premium yield for the third quarter was 38 four basis points, which was down seven tenths of a basis point compared to last quarter. The.

The decrease was primarily a result of a decline in the enforced premium yield as the older policies with generally at a higher premium rates continue to run off.

As refinance activity decreased we also realized less benefit from accelerated premiums earned from single premium policy cancellations.

During the quarter, they were $17 million, which was flat to last quarter, but down from $32 million in the third quarter of 2020.

Shifting over to credit.

Net losses incurred were $21 million in the third quarter compared to $29 million last quarter and $41 million in the third quarter last year.

And the quarter, we received approximately 9900, new delinquency notices which represents less than 90 basis points of the number of loans insured as of the start of the quarter and drove the low loss ratio of 8.1%.

As a point of comparison in the third quarter of 2019 before the onset of the COVID-19 pandemic, we received approximately 42% more new delinquency notices and they represented approximately 140 basis points of the number of loans insured at the beginning of that quarter, while the loss ratio in the third quarter of 2019 was $12.

1%.

We are encouraged by the strength of the housing market in the credit trends were experiencing including the low level of early payment defaults believe they are a good indicator of near term credit performance.

These positive credit trends continued in October they're notice inventory declining by another 1500 notices as curious continued to outpace new notices.

The estimated claim right on new notices received in the third quarter of 2021 was approximately 75% compared to approximately 8% in the third quarter of 2020.

And the quarter, we realized $18 million, a favorable loss reserve development compared to immaterial development last quarter and in the third quarter of last year.

The favorable development in the quarter was primarily attributable to delinquency notices received prior to the start of the COVID-19 pandemic.

At this point, we still have not seen adequate support to make any adjustments to the reserves associated with the large cohort of Covid related delinquency notices received primarily in Q2 of last year, but we remain encouraged as we saw a similar level of notices and cures in October as we did in September.

The number of claims received in the quarter remain very low to the various foreclosure and eviction moratoriums.

Primary paid claims in the quarter over $18 million compared to $11 million last quarter.

A modest increase in paid claims this quarter is primarily the result of a commutation of coverage on nonperforming loans in the third quarter.

We continue to expect claim payments to remain low for the next few quarters, given the timelines for foreclosure and eviction moratoriums for GSC loans and the additional procedural safeguards required by the CFPB.

Next I wanted to spend a couple of minutes talking about our capital position and capital actions in the quarter.

As Tim mentioned in the third quarter, we paid and eight cents per share dividend for a total of $27 million and repurchase 10 million shares for a total of $150 million.

In October we repurchased an additional three 8 million shares for a total of $60 million under 10 B five one plan, we put in place earlier this year.

The board also authorized an additional $500 million share repurchase program that expires at the end of 2023.

And as previously announced the board declared eight cents per share dividend payable on November 23rd.

At the end of the third quarter, we had $716 million of holding company liquidity and a 2.6 billion access to the <unk> minimum requirements at the operating company.

And <unk> access to the <unk> requirements as of September 30th.

Resulted in a tiemeyer sufficiency ratio of 180% and remained above our current target level.

Since Mgic's capital position continues to be above our current target level, we are having discussions with a regulator about a dividend to be paid in the fourth quarter of 2021.

As of October 30th.

As of October 31, 2021 are holding companies liquidity also remains above our current target levels, even if we fully use the remaining $81 million on the share repurchase authorization that expires at year end 2021.

Any additional dividends paid from MGIC to the holding company in the fourth quarter would increase the holding companies liquidity.

At this time our plan is to use those additional dividends if they received to settle the eventual redemption of our 9% convertible junior debentures due in 2063.

Our most recent 10-K has additional details but under the terms of the debentures, we can redeem the debentures for principle plus accrued interest when our share price closes above a certain level for 20 or 30 consecutive trading days.

For 2021 that share price level is $17.20.

And the share price level is reduced annually as a result of the dividends paid in the prior year and under certain circumstances is allowed under the debentures.

We hope to provide a redemption notice for the debentures in the near term with the redemption data at least 30 days later.

If we provide a redemption notice we expect virtually all of the holders of the debentures will elect to convert their debentures into common stock before the redemption date.

Under the terms of the debentures, we may elect to pay cash to converting holders in lieu of issuing shares and we expect we would do so under most circumstances.

Given our strong operating results in recent share price performance. We felt that was the right time to position the holding company to actively consider the retirement of the debentures.

While the timing remains uncertain retiring the debentures would eliminate approximately 16 million potentially dilutive shares in $19 million in annual interest expense and would reduce our debt to capital ratio by approximately 300 basis points as of September 30th on a pro forma basis.

As Tim mentioned, we continue to believe that are balanced approach to maintaining a strong capital position provides the most flexibility to maximize the long term value of both the writing company and the holding company.

This balanced approach includes using former commitment quota share reinsurance treaties accessing the capital markets for excess of Los reinsurance the island transactions and seeking dividends from MGIC to the holding company is appropriate.

While not an indication of the amount of dividends, we would see our current expectation is that any future dividends paid from MGIC to the holding company will occur less frequently than the quarterly cadence we had pre COVID-19 due in part to the robust liquidity position of the holding company.

With that let me turn it back to Tim.

Thanks Nathan.

Before moving to questions, let me address a few additional topics.

The federal government through its various agencies, including FHFA and CFPB continues to focus as housing policy efforts and providing access to sustainable and affordable housing promoting foreclosure and eviction mitigation for homeowners impacted by COVID-19, and ensuring a successful economic recovery and not I'm, making large scale changes to the housing finance it.

The structure.

We will continue to advocate for the increased use of private mortgage insurance and the housing finance industry in order to reduce taxpayer exposure to housing while still maintaining a resilient housing finance system.

It MGIC, we're focused on providing critical support to the housing market, especially low and moderate income and first time homebuyers.

Long term I remain encouraged about the future will that our company and industry complaining housing finance and believe that other regulators and policymakers share similar view, because our company and industry organized solely to provide credit enhancement solution to lenders borrowers in a <unk> in all economic cycles.

Not only does private mortgage insurance offer dedicated capital day in day out to the housing industry that offers many solutions and a great value proposition for lenders and consumers to overcome the number one barrier to homeownership the down payment.

In closing, let me recap I, saying that we are currently writing high levels of quality new insurance.

And are experiencing low levels of delinquencies, both newly reported and those already are in delinquency inventory. The housing market remains strong and we have a book a business that has solid underwriting care credit characteristics, which is supported by a strong and dynamic balance sheet with a low debt capital ratio investment portfolio of nearly $7 billion.

Contractual premium flow and a robust reinsurance program.

I am confident in our positioning in this market and we liked the business opportunities that the current operating environment present.

We have the right team in place to build on our solid foundation to continue to deliver competitive offerings and best in class service to our customers and generate strong returns for our shareholders.

With that operator, let's say question.

Thank you I think you might need to.

To ask a question you don't need to press power one on your telephone keypad.

That'll be star one on your telephone keypad question until.

Until we get a question.

Please somebody will be compiled.

Yeah.

First question comes from the line.

Mostly joy Joanne is now open you may ask the question.

Yeah.

Good morning, Thank you.

First just on the you know the capital returned subdued canceled return do you have a target that to capital range. You should think about as we sort of think about the cadence of capital returned.

Closes Nathan I'll take that one and thanks for the question.

I think what we've said last quarter and still feel still feel the same way is that right now we're in the low twenties, 20% to 21%. That's the capital I would certainly feel comfortable if that came down a little bit but also comfortable with where we are so don't feel like we need to take near term actions, but also don't feel like if some of the smaller.

That issues that we do have outstanding like.

The 9%.

If we are able to resolve those wouldn't feel like we need to necessarily issue new debt in order to replace that either.

Okay, Great. That's helpful and then actually when you're redeemed thee.

The 2063 is there any.

Book value impact, we should think about.

The only thing that I would think about is under the terms of the debentures, our redemption notices really when the underlying stock is worth about 130% of par value.

On the on the balance sheet, there on our balance sheet at par value. So to settle them there will be a assuming that we pay cash versus issue. The shares there would be a book value impact presumably for the delta between the value of the underlying shares in the par value that we have but again, that's kind of dependent on what happens.

The share price in the future and post or redemption notice. So it is it is hard to fully.

Fully pin down, but I do think there will be a book value impact there.

Okay, great. Thanks, a lot.

Thank you have the next question comes from the last call again.

Hello, Thank you May I ask.

Good morning, and thanks for taking my questions. Just wondering if you could expand a little on this favorable development in the pre Covid population.

Factors might be driving development there you think.

Yes. This is Nathan again, I think similar to what we've what we've been talking about it it's really for US every quarter doing a similar evaluation and really asking ourselves do we have enough new evidence to change our initial estimates and I think out of that pre COVID-19 cohort there weren't nearly as many forbearance items in there.

The kind of P. Covid related notices are they have had longer time to work their way through and I think got to the point, where the actual cure activities to date.

Just made it such that felt like our initial estimates were.

We're a little too high and ultimately took that $18 million in favorable development this quarter.

Got it that makes sense. Thank you and then just kind of looking at required assets on your P. Meyer.

Main relatively constant in the last few quarters you know.

Maybe as delinquent loans age Internet curious and higher capital requirements with them. So.

Would it be fair to think of that dynamic maybe being counteracted. So to speak by just the pace of cures are delinquent loans, you've seen that would just outpaced notices.

Yes, I think specific to the required assets on delinquent loans I think you're right to call. Those two dynamics. The the last aging bucket and Pmiers too I believe is 12 months plus so a lot of the loans. They are in there and a final aging bucket at this point, but we continue to see.

Good care activity in the notice inventory continuing to decline. So when there is less delinquent risk, obviously less required capital for that risk.

Got it that makes sense. Thank you those are all my questions.

Thank you have the next question comes from the lineup Matt.

Your line is now all thank you may I ask a question.

Thanks have a follow up question about the redemption of the debentures.

Nathan did you indicate the stock needs to be trading somewhere above $17 for a couple of weeks.

Before you can redeem.

Yes marketing Nathan.

Four 2021 that the key share price level for the debentures is $17.20.

Because of the dividends that we've paid in calendar 21, including the fourth quarter dividend that we will pay.

That level will come down for calendar 22.

We think around $17 even so.

That's the level that we need to share price to be out for 20 or 30 consecutive trading days in order to redeem the debentures.

Okay.

And then.

Terms of thinking about the impact.

Would you then assuming I think you said you expect everyone to convert.

To comment would you then take the amount of cash that it would have taken.

To buy back the bonds, if they didn't convert buyback then effectively stock.

So.

As I mentioned in the prepared remarks under the terms of these adventures, we're actually able to settle in cash or shares if holders convert so even if they elect to convert we have the option to settle in cash there's a set formula and the documents that describes how that works, but we think under most circumstances.

Stances, we would pay the cash versus issue the shares and then repurchase them got it got it that's helpful.

And separate question Tim.

Some of your hearing my peers have been investing are exploring investments and related not Ma businesses.

It's been a long time since the Seabass from Sherman days, but as you sit here today with considerable excess capital could you just discuss your views of diversifying the business through M&A as a strategy for enhancing shareholder value.

Yeah No I appreciate the question. It has been a long time since the Cvs in Sherman days, but I do I do remember those.

Nothing and I mentioned that prepared remarks, and we think about how we deploy capital we start with being able to write high quality business like we do we do consider what other investment opportunities might be and you can think about that from diversification standpoint, but.

But if we don't see anything that we think really creates the value for the enterprise. So for the shareholders then.

Then we start to move down the stack and look towards capital to return as being the best use of any excess capital that we have and so that's the way we've been looking at it. We always are looking quite frankly to see if there's anything out there that we think that would be accretive overtime.

But we haven't seen it over.

Over and over the last decade quite frankly, that's not to say we wouldn't.

Because it again, it's a good thing to have excess capital to think about those things, but there's nothing that is called our attention that leads us to think that we would change sort of current practice.

Okay got it thank you.

Sure.

Thank you and next question comes from the lineup.

The line is now open you may ask anyways.

Thank you just hoping you could talk a little bit about.

Your expectations from other normal normal.

Yeah, all of new noticed it the.

Kind of current environment.

Home price appreciation impact.

Doug It's Nathan.

I think for us the level of new notices if you think about it in terms of we described it in terms of basis points on account basis basis points of the number of loans that are enforce that's been trending down for us for some time largely driven by the continued run off of the legacy book.

When we see new noticed delinquency rates on the more recent vintages they are lower so.

We've experienced really low in the last.

Six months really load new delinquency notice rates.

But I think a lot of those are still from the legacy books. So as those continued to burn off there might be some.

[noise] tailwind there I think the the headwind that we're likely to see over the next couple of years. It's just that we have these really large books of business from 19, and 20 and early 21 that will be entering the years, where they typically throw off the most new delinquency notices so the net of those things are I think it is really hard to judge out.

Out much beyond what's happening.

In the near term here.

Yeah, and then the other one thing I'd add to Doug as I think about the home price appreciation that's happening is it.

It might help avoid some delinquencies, but I think about it more in terms of being able to turn more delinquencies into either lower severity claims are into no claims that all into curious because of it being a potential resolution of the delinquency.

Great. Thank you.

Sure.

Next question.

Yeah. Your line is now thank you.

Thank you. Thanks for taking my question just a couple of quick ones for me. So I just wanted to follow up on Mark's question around emanate.

I guess, mark was asking a little bit outside of emanating somewhat confused with maybe a loss since about the industry itself do they need to be six mortgage insurance companies and what are your thoughts around.

Tension for an industry consolidation Hill, we announced because everyone thinks that makes sense tangible credit is reasonably good evaluations of basically book value. So I'm just wondering what are your thoughts on that.

No. It's a fair question.

One I would expect that we have gotten and we're going to continue to get as an industry.

The way, we look at it I think the way it is looked at as sort of the math equation.

Anybody looking to to sell is looking to get paid for their book value and effectively their market share in future sort of market share on that you have to make sure that the loss and that sort of share.

You can counteract that was expense savings.

The math it from.

When we've looked at this does not work I think it's something probably ever anybody in the industry looks at somewhat regularly.

And so what do we need six that's a good question. We've had a lot of volume last few years that made it easier.

<unk> indicated that we think volume is going to be slightly lower next year, but we do think we're going to be able to continue to grow insurance in fort.

So it's something that I think a question that we're going to continue.

To get asked we're going to continue to look at the math has to work from the loss of potential share of the two combined entities compared to the expense savings that you can have.

Okay, well that makes it. So then just maybe just sending on the regulatory front just very quickly was curious.

Any impact from recent developments.

I think like New York quick that we've been talking about requiring nonbanks to comply with the CRA now I know that wouldn't directly impact you, but could you have a knock on them back from that.

I mean again, it's a valid question and that just came out this week I think from a knock on effect.

Obviously, where it's regulated by the state currently.

And so some states are more active than others. So I think it's something that we we have a team that pays close attention to that I don't foresee any knock on effect from that per se I think it could lead to some more discussions with.

Some of our customers as to how they participate in that space and how we can help.

But that is that a huge portion of our business at this point, but.

But we are well suited to be able to have those conversations for those customers as they want to engage on it.

Normally proactive with those customers can create opportunity from a regulatory standpoint again, we try to stay abreast of what's happening out there I don't see a specific knock on effects, though here that I should have concerned about.

Okay. That's helpful. And then my last question just.

Really kind of a big one in terms of just the premium replaced.

To the industry as a whole we understand.

I think people understand the dynamics of why it's declined the bigger question I think is where does the influence portfolio. You stabilize you used to give that disclosure and IW premium use I don't know if you'd be willing to share your current quota.

And I W. You know just any thoughts you have on the way it works for you.

Thank you.

Yeah, I think when we look at portfolio yields we've talked the last few quarters about what the trend line is.

A basis point a quarter.

And I think we would expect that as we move towards the end of this year as well.

We look at it from a forecasting standpoint. The reality is there is market dynamics that can impact that as well as sort of I would say that from a pricing market dynamics standpoint, a new business, but also from a mix standpoint, as we transition to more purchase volume.

Additionally, that's going to come with a little bit higher LTV, a little bit higher premium.

And so that mixed could impact sort of how the premium sort of moves which is why I think we're always a little bit I guess.

I guess reluctant to sort of go too far out and worth what might happen there, but again. It's available question, it's something that we look at it and we think about.

But then also the key focus as the returns that were able to get off of the business.

And from a capital deployed still feel extremely comfortable with the risk return equation that we're able to get and I think others are able to get in the industry right now.

Let me hear this is Mike may just add onto that white light is difficult is because we're looking to predict prepayments for everybody wants to go prepayments of like the 2019 book and Pryor. If you look at the last two years 2021, it's about 65% of our current enforce so 35% from my seated prior which.

Is higher premium rates.

Before the more granular pricing and the risk based on all those things have taken place I think the quarter <unk> go back last quarter. It was like 40%. So that gets to be part of the struggle right and trying to forecast where things are added saddling new business coming in but.

But it's also the pace of prepay and stuff the old Oh book and it's a long tail business. So that's what makes it more complicated.

To to try and give a more specific guidance.

Oh.

Thank you for taking my questions.

Thanks.

Next question comes from the lineup, Brian Gilbert how open you may I ask a question.

Hi, Thanks morning, guys. Unfortunately have jumped on the call late so I apologize if you've already answered this.

But is there any impact or benefit to your premium yield going forward from the <unk> terminations.

Right.

Ryan It's Nathan there will be a modest benefit one of the reasons why we elected to terminate those deals is that the prepayments over those books had been so significant that they are just relatively small deals at this point and those are some of our older single vintage quota share deals we had less optionality raw.

Allative to reducing the quota share terminating so felt like I think in one case it was our only option.

So I do think Directionally, there's there's a positive there, but I think it's going to be it's going to be very modest and again that will still show up in the queue for numbers, including the the termination fee that we pay across those two deals which is $5 million combined.

So the kind of favorable effect of not seating premium under those deals won't really be until the first quarter of 22, but like I said.

They've really run down quite a bit so there's not a lot of not a lot of volume and those from a premium standpoint or from <unk> benefit standpoint at this point.

Okay got it second.

Second question on anti W. It looks like the 90, plus LTV Niwa has been taking up as a percentage of total over the course of 2021 is that just a function of home price appreciation and the characteristics of total origination volume or is is that a more.

Mtg's strategy too.

I guess capture the best returns on that IW in the market.

I would say the movement there is that as much about the market and that's sort of the move from.

A bigger portion of that IW being from <unk> to be more purchase driven and.

So just with the lack of revised on average higher ltvs in that population. So I'd say that would be the biggest driver.

Okay great.

The last one for me is is on I guess that the relationship between premium yielded insurance enforced if I look at <unk>.

<unk> relative to two Q, you've been able to offset.

Lower premium yield with.

Higher insurance in force do you think that's a dynamic that can continue in in <unk> in in 2022 or should we be thinking about.

Not getting enough persistency to offset premier be able to compression.

Ahead.

It's Nathan I'll have to I'll take that one but I think we've talked about Directionally. We think that we can continue to grow the insurance in force. Although it may be at a more modest pace than we've had in recent quarters, where I think we're right now this quarter at 12% year over year growth.

So the.

If we're growing insurance enforced and the question is we do expect that the enforce yield will continue to decline, which one is happening.

At a faster pace and I think I think that's hard to judge but those are certainly offsetting factors, even if the premium yield does come down we think that'll be mitigated by enforce growth over the next couple of quarters and then like we've said as you get out beyond the next couple of quarters is just a function of so many things that.

I really market, driven and frankly, they're got to happen. So it's really hard to predict.

Okay understood I appreciate the color. Thank you.

Thank you again, if anyone would like to ask you. A question you would need to press one on your telephone keypad.

Next question comes as a line I'm Cathy done. Your line is now open you may ask.

Right.

Good morning.

First just the type of question Nathan, whereas the 5 million termination. So you're gonna be booked is that gonna want to premium or a big sound fine.

Jeff is Nathan that will be on the premium line.

Okay.

And then as you think about your 2060 three's.

Are you since spending your your open market buyback activity or changing the parameters of your 10 B five one in anticipation of that for you continuing with the same parameters you have for your two three by that.

I think the way that we thought about that as.

Once we've provided the redemption notice.

That that is kind of a period, where we could potentially be issuing stock wouldn't be appropriate for us to be repurchasing shares at least from our perspective at that time, but until the time that we provide the redemption notice.

Which again is after that kind of 20 or 30 trading days, it's not really impacting kind of how we're thinking about share repurchase execution in the near term.

Okay.

And then the last thing I wanted to follow up on on the question about M&A and I'm curious as you think about diversification.

Do you weigh the economic value.

Against the possible challenges I've actually realizing that value with diversification kind of getting stuck in an M. I multiple does that come into play as you consider diversification versus excess capital return to shareholders.

Jeff I guess I would say it comes into play and that when we look through the lens. It has to make sense as far as how it I think aligns with our business.

And I do think it ultimately has to translate into value to our shareholders too and so I don't know if those are always mutually exclusive necessarily but it is thought process and that it has to be meaningful in my opinion.

For it to really be diversification right it can't be something that small and that does not translate into value.

In the eyes of shareholders.

Shareholders now bye hope would be that.

Everything that we do.

Create value and then ultimately the shareholders view it that way, but that's an important piece of the connection in my mind is that that you need to ultimately create that value for the shareholders and that's done through operating the business with where we are right now we feel very confident we're able to do that and and that will also be able to create value and returning the excess capital.

Yeah, I think it's a factor in when you think about diversification of and that create value ultimately for the for the business for the shareholders.

Okay. Thanks.

Sure.

Yeah, we don't have any question.

I was at the moment.

Okay.

Okay, well I want to thank everybody for their interest MGIC and hope everyone has a safe and healthy holiday season, as we move into the last part of the year. Thanks, everyone.

Thank you ladies and gentleman that concludes.

Today's conference call. Thank you also thank you speeding you may know.

[music].

Good day, and thank you for standing by and welcome to the MGIC Investment Corporation third quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

And please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Mr. Mike Zimmerman Sir Please go ahead.

Thanks, Matt Good morning, and thank you for joining us this morning and for your interest in MGIC Investment Corporation, joining me on the call today to discuss the results for the third quarter of 2001, our Chief Executive Officer, Tim Mattke, and Chief Financial Officer, Nathan Colson.

I want to remind all participants that our earnings release last evening, which may be accessed on our website, which is located at MTG MGIC com under newsroom.

Certain additional information about the company's quarterly results that we will refer to during the call and includes a reconciliation of the non-GAAP financial measures. So the most comparable GAAP measure.

We have posted on our website a presentation that contains information pertaining to our primary risk in force new insurance written reinsurance transactions and other information, which we think youll find valuable as well.

I also want to remind listeners that from time to time, we may post information about our underwriting guidelines and other presentations or corrections in the past presentations on our website that investors and other interested parties may find valuable.

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 COVID-19 that could cause actual results to differ materially from those discussed in the call or contained in the form 8-K and Form 10-Q that were filed.

Last night.

If the company makes any forward looking statements we are not undertaking an 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 are current at any time other than the time of this call or the issuance of the form 8-K, or 10-Q with that I'd like to introduce Tim.

Thanks, Mike Good morning, everyone.

I'm pleased to report that we generated another quarter of very strong financial results. After my opening remarks, Nathan will provide more detail about our financial results and capital position.

Before we open the line for questions I'll wrap up by discussing the current operating environment, including activities related to housing finance policy.

During the quarter, we earned GAAP net income of $158 million quarter.

Quarterly financial results continued to reflect the solid credit quality of our increased insurance in force.

Strong housing market, the decreasing delinquency rate and improving economic conditions is more local economies returned to pre pandemic levels of activity.

As we expected refinance activity has slowed however, the purchase market remains strong and accounted for nearly 90% of the $28 7 billion of new business. We wrote in the third quarter. This.

This level of new business writings combined with a higher annual persistency resulted in our insurance in force, increasing two 4% to 268 billion.

Nearly 12% higher than last year.

Reflecting the continued strength of the housing market purchase applications and our application pipeline, leading indicator then IW continue to account for more than 85% of applications received in recent months.

Last five quarters has been IW, where the five biggest and our company's 64 year history. So it should not surprise anyone that we do not expect to continue writing such high levels of new business.

As we look out over the next several quarters, we expect the refinance activity will remain low and the purchase activity, while lower than the records of the five prior quarters will remain robust as consumer demand for homes remains strong and interest rates. Despite rising modestly are still attracted by historical standards.

This environment combined with increasing annual persistency should allow our insurance in force to continue to grow although perhaps a slower annual rate than we have been enjoying in recent quarters.

Taking a look at our in force portfolio, our loss ratio was a low eight 1% in the quarter.

This result, primarily reflects the current economic conditions, the quality of our existing book of business and a low number of new delinquency notices received.

I continue to be encouraged by the quality of new insurance written and the positive trends in credit performance, which continued through October.

At quarter end, the excess of our pmiers available assets over the minimum required assets increased by $300 million.

To two 6 billion.

And our Pmiers sufficiency ratio was 180% at the end of the third quarter.

As we discussed last quarter, our capital management strategy centers on maintaining financial flexibility at both the holding company and the writing company to protect our policyholders and to create long term value for shareholders.

This value can be created by writing more primary mortgage insurance pursuing new business opportunities retiring debt paying dividends and repurchasing stock.

We executed on this strategy during the quarter by writing $28 7 billion of new business and by returning nearly $180 million to shareholders through the repurchase of $10 million 10 million shares and paying the increased common stock dividends.

In connection with our strategy maintaining capital flexibility at the holding company means maintaining a target level of liquidity well in excess of our near term needs.

At the operating company it means maintaining diverse sources of capital and a P. Myers sufficiency ratio that will enable us to grow even in times of stress and position it for changes to our operating environment.

Of course, these target levels are dynamic and change as the operating environment changes.

In summary, we continually look for ways to maximize near term business opportunities, while remaining focused on long term success of the company and value for our shareholders.

I believe the actions we have taken this quarter and the announcement of the new share repurchase authorization that Nathan will discuss demonstrate our commitment to that strategy.

We have a strong and dynamic balance sheet, we are confident our positioning in the market and we like the risk reward equation that the current conditions offer with that let me turn it over to Nathan.

Thanks, Tim and good morning.

As Tim mentioned, we had another quarter of strong financial results and.

In the third quarter, we earned $158 million of net income or <unk> 46 per diluted share and generated an annualized 13% return on beginning shareholders' equity.

Adjusted net operating income was $157 million compared to $150 million in the third quarter last year.

During the quarter total revenues were $296 million the same as last year.

The net premium yield for the third quarter was 38 four basis points, which was down seven tenths of a basis point compared to last quarter.

The decrease was primarily a result of a decline in the in force premium yield as the older policies was generally at higher premium rates continue to run off.

As refinance activity decreased we also realized less benefit from accelerated premiums earned from single premium policy cancellations during.

During the quarter, they were $17 million, which was flat to last quarter, but down from $32 million in the third quarter of 2020.

Shifting over to credit.

Net losses incurred were $21 million in the third quarter compared to $29 million last quarter and $41 million in the third quarter last year.

In the quarter, we received approximately 9900, new delinquency notices which represents less than 90 basis points of the number of loans insured as of the start of the quarter and drove the low loss ratio of eight 1%.

7%.

We are encouraged by the strength of the housing market and the credit trends, we're experiencing including the low level of early payment defaults believe they are a good indicator of near term credit performance.

These positive credit trends continued in October theyre notice inventory declining by another 500 notices as carriers continue to outpace new notices.

The estimated claim rate on new notices received in the third quarter of 2021 was approximately seven 5%.

Compared to approximately 8% in the third quarter of 2020.

In the quarter, we realized $18 million of favorable loss reserve development compared to immaterial development last quarter and in the third quarter of last year.

The favorable development in the quarter was primarily attributable to delinquency notices received prior to the start of the COVID-19 pandemic.

At this point, we still have not seen adequate support to make any adjustments to the reserves associated with a large cohort of COVID-19 related delinquency notices received primarily in Q2 of last year, but we remain encouraged as we saw a similar level of notices and cares in October as we did in September.

The number of claims received in the quarter remained very low due to the various foreclosure and eviction moratoriums.

Primary paid claims in the quarter were $18 million compared to $11 million last quarter. The modest increase in paid claims. This quarter was primarily the result of the commutation of coverage on nonperforming loans in the third quarter.

We continue to expect claim payments to remain low for the next few quarters, given the timelines for foreclosure and eviction moratoriums for GSE loans and the additional procedural safeguards required by the CFPB.

Next I wanted to spend a couple of minutes talking about our capital position and capital actions in the quarter.

As Tim mentioned in the third quarter, we paid an <unk> <unk> per share dividend for a total of $27 million and repurchased 10 million shares for a total of $150 million.

In October we repurchased an additional $3 8 million shares for a total of $60 million under a <unk> one plan, we put in place earlier this year.

The board also authorized an additional $500 million share repurchase program that expires at the end of 2023.

And as previously announced the board declared a <unk> <unk> per share dividend payable on November 20 <unk>.

At the end of the third quarter, we had $716 million of holding company liquidity and a $2 6 billion access to the pmiers minimum requirements at the operating company.

Mgic's access to the <unk> requirements as of September 30th.

It resulted in a <unk> sufficiency ratio of 180% and remained above our current target level.

Since Mgic's capital position continues to be above our current target level, we are having discussions with our regulator about a dividend to be paid in the fourth quarter of 2021.

As of October 30.

As of October 31, 2021 are holding companies liquidity also remains above our current target levels. Even if we fully used the remaining $81 million on the share repurchase authorization that expires at year end 2021.

Any additional dividends paid from MGIC to the holding company in the fourth quarter would increase the holding company's liquidity.

At this time our plan is to use those additional dividends if they received to settle the eventual redemption of our 9% convertible junior debentures due in 2063.

Our most recent 10-K has additional details but under the terms of the debentures, we can redeem the debentures for principal plus accrued interest when our share price closes above a certain level for 20 or 30 consecutive trading days.

For 2021 that share price level of $17 20.

And the share price level is reduced annually as a result of the dividends paid in the prior year and under certain circumstances as allowed under the debentures.

We hope to provide a redemption notice for the debentures in the near term with the redemption data at least 30 days later.

If we provide a redemption notice we expect virtually all of the holders of the debentures will elect to convert their debentures in the common stock before the redemption date.

Under the terms of the debentures, we may elect to pay cash to converting holders in lieu of issuing shares and we expect we would do so under most circumstances.

Given our strong operating results and recent share price performance. We felt it was the right time to position the holding company to actively consider the retirement of the debentures.

The timing remains uncertain retiring the debentures would eliminate approximately 16 million potentially dilutive shares and $19 million in annual interest expense and will reduce our debt to capital ratio by approximately 300 basis points as of September 30 on a pro forma basis.

As Tim mentioned, we continue to believe that our balanced approach to maintaining a strong capital position provides the most flexibility to maximize the long term value of both the writing company and the holding company.

This balanced approach includes using forward commitment quota share reinsurance treaties accessing the capital markets for excess of loss reinsurance via ILM transactions and seeking dividends from MGIC to the holding company as appropriate.

With that let me turn it back to Tim.

Thanks Nathan.

Before moving to questions, let me address a few additional topics the federal.

<unk> through its various agencies, including FHFA and CFPB continues to focus its housing policy efforts on providing access to sustainable and affordable housing promoting foreclosure and eviction mitigation for homeowners impacted by COVID-19, and ensuring a successful economic recovery and not on making large scale changes to the housing finance infrastructure.

We will continue to advocate for the increased use of private mortgage insurance and housing finance industry in order to reduce taxpayer exposure to housing while still maintaining a resilient housing finance system.

At MGIC, we are focused on providing critical support to the housing market, especially low and moderate income and first time homebuyers.

Long term I remain encouraged about the future role that our company and industry can play in housing finance and believe that other regulators and policymakers share a similar view because our company and industry are organized solely to provide credit enhancement solutions to lenders borrowers and the gse's in all economic cycles.

Not only does private mortgage insurance offer dedicated capital day in and day out to the housing industry and offers many solutions and a great value proposition for lenders and consumers to overcome the number one barrier to homeownership the down payment.

In closing, let me recap by saying that we are currently writing high levels of quality, new insurance and are experiencing low levels of delinquencies, both newly reported and those already our delinquency inventory. The housing market remains strong and we have a book of business that has solid underwriting credit characteristics, which is supported by a strong and dynamic balance.

She'd with a low debt to capital ratio the investment portfolio of nearly $7 million contractual premium flow and a robust reinsurance program.

I am confident in our positioning in this market and we like the business opportunities that the current operating environment present.

With that operator, let's take questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone keypad again that will be star one on your telephone keypad to ask the question until we get a question.

Please standby will be compile the Q&A roster.

First question comes from the line of Bose George Your line is now open you may ask your question.

Hey, guys. Good morning, first just on the capital return subdued capital return do you have a target debt to capital range. We should think about as we sort of think about the cadence of capital return.

Hey, Bose, it's Nathan I'll take that one and thanks for the question.

I think what we've said last quarter and still feel still feel the same way is that right now we're in the low 20%, 20%, 21% debt to capital I would certainly feel comfortable if that came down a little bit but also comfortable with where we are so don't feel like we need to take near term actions, but also don't feel like if some of this.

Smaller debt issues that we do have outstanding Lake.

The 9%.

We are able to resolve those wouldn't feel like we need to necessarily issue new debt in order to replace that either.

Okay, Great. That's helpful and then actually when you redeemed the.

2063 is there any book value impact, we should think about.

The only thing that I would think about is under the terms of the debentures. Our redemption notice is really when the the underlying stock is worth about 130% of par value.

On the on the balance sheet, there on our balance sheet at par value.

So to settle them there will be a assuming that we pay cash versus issued the shares there would be a book value impact presumably for the delta between the value of the underlying shares in the par value that we have but again thats kind of dependent on what happens to the share price in the future and post our redemption notice. So it is.

It is hard to fully.

Fully pin down, but I do think there will be a book value impact there.

Okay, great. Thanks, a lot.

Yeah.

Thank you. The next question comes from the line of Colin Jennifer. Your line is now open you may ask your question.

Hey, good morning, Thanks for taking my questions. Just wondering if you could expand a little on this favorable development in the pre Covid population.

Factors might be driving development there you think.

Yes. This is Nathan again, I think similar to what we've what we've been talking about it's really for US every quarter doing a similar evaluation and really asking ourselves do we have enough new evidence to change our initial estimates and I think out of that pre COVID-19 cohort there were nearly as many forbearance items in there as the.

Kind of peak Covid related notices are they've had longer time to work their way through and I think got to the point, where the actual cure activity to date.

Just made it such that felt like our initial estimates were.

We're a little too high and ultimately took that $18 million in favorable development this quarter.

Got it that makes sense. Thank you and then just kind of looking at required assets on your P. Meyer.

<unk> relatively constant the last few quarters.

And maybe as delinquent loans Asia Tonight carry some higher capital requirements with them. So.

Would it be fair to think of that dynamic maybe being counteracted. So to speak by just the pace of cures of delinquent loans. We've seen that are just outpaced new notices.

Yes, I think specific to the required assets on delinquent loans, I think youre right to call out those two dynamics.

The last aging bucket in P. Myers to I believe is 12 months plus so a lot of the loans they are and Theyre kind of final aging bucket at this point, but we continue to see good care activity in the notice inventory continuing to decline so when theres less delinquent risk, obviously less required capital for that risk.

Got it that makes sense. Thank you those are my questions.

Thank you. The next question comes from the line of Matt Mike Jeffries. Your line is now open you may ask your question.

Thanks Heather.

Follow up question about the redemption of the debentures.

Nathan did you indicate the stock needs to be trading somewhere above $17 for a couple of weeks.

Before you can redeem.

E marketer Nathan.

For 2021 that the key share price level for the debentures is $17 20.

Because of the dividends that we paid in calendar 'twenty, one, including the fourth quarter dividend that we will pay.

That level will come down for calendar 'twenty two.

So we think around $17.

So.

That's the level that we need the share price to be at for 20 or 30 consecutive trading days in order to redeem the debentures.

Okay.

And then.

In terms of thinking about the impact.

Would you then assuming I think you said you expect everyone to convert.

To comment would you then take the amount of cash that it would have taken.

To buyback the bonds, if they didn't convert to buyback then effectively stock.

So as I as I mentioned in the prepared remarks, the under the terms of these debentures were actually able to settle in cash or shares if holders convert so even if they elect to convert we have the option to settle in cash.

A set formula in the documents that describes how that works, but we think under most circumstances, we would pay the cash versus issued the shares and then repurchase them got it got it that's helpful.

And separate question Tim.

Some of your peers have been investing are exploring investments and related non semi businesses.

It's been a long time since the sea bass from Sherman days, but as you sit here today with considerable excess capital could you just discuss your views of diversifying the business through M&A as a strategy for enhancing shareholder value.

No I appreciate the question it hasnt been a long time since the Cvs and Sherman days, but I do I do remember those.

Something and as I mentioned in prepared remarks, and we think about how we deploy capital we start with being able to write high quality business like we do we do consider what other investment opportunities might be and you can think about that from a diversification standpoint, but.

But if we don't see anything that we think really creates the value for the enterprise and for the shareholders.

And then we start to move down the stack and look towards capital return as being the best use of any excess capital that we have and so that's been the way we've been looking at it.

Are looking quite frankly to see if theres anything out there that we think that would be accretive over time.

But we haven't seen it.

Over these over the last decade quite frankly, that's not to say we wouldn't.

Because again, it's a good thing to have excess capital that to think about those things, but there's been nothing that has caught our attention that leads us to think that we would change sort of current practice.

Okay got it thank you.

Sure.

Thank you next question comes from the line of Doug <unk>. Your line is now open you may ask your question.

Thank you just hoping you could talk a little bit about <unk>.

Are your expectations for what a normal level.

Yes, new notice in the current environment.

Our men on how home price depreciation impact.

Hey, Doug it's Nathan.

For us the level of new notices if you think about it in terms of we describe it in terms of basis points on account basis basis points of the number of loans that are enforce thats been trending down for us for some time largely driven by the continued runoff of the legacy book.

When we see new notice delinquency rates on the more recent vintages. They are lower so we've experienced really low in the last six months really low new delinquency notices rates.

But I think there are a lot of those are still from the legacy books. So as those continue to burn off there might be some <unk>.

Tailwind there I think the headwind that we're likely to see over the next couple of years is just that we have these really large books of business from 19 in 'twenty and early 'twenty, one that will be entering the year is where they typically throw off the most new delinquency notices so the net of those things are I think it's really hard to judge out.

Out much beyond what's happening.

In the near term here.

Yes, the one thing I would add to Doug as I think about the home price appreciation that's happening is.

It might help avoid some delinquencies, but I think about it more in terms of being able to turn more delinquencies into either lower severity claims are into no claims at all into cure because of it being a potential resolution of the delinquency.

Great. Thank you.

Sure.

Next question, we have the line of BMO. Your line is now open.

Quick question.

Thank you. Thanks for taking my question I was just.

Quick ones from me first I just wanted to follow up on Mark's question around M&A.

I guess, mark was asking a little bit outside of M&A would make some of your peers with maybe just.

Just about the industry itself do they need to be fixed mortgage insurance companies and what are your thoughts around potential industry consolidation here, we announced because everyone seems to have access to capital credit is reasonably good but valuations are basically book value. So just wondering what your thoughts are on that.

It's a fair question.

One I would expect that we will we have gotten and we're going to continue to get as an industry.

The way, we look at it I think the way I would look at it as sort of the math equation.

Anybody looking to to Sal is looking to get paid for their book value and they are effectively their market share and future sort of market share on that do you have to make sure that the loss and that sort of share you can counteract that was expense savings.

The math.

We've looked at this has not worked I think it's something probably ever anybody in the industry looks at somewhat regularly.

And so what do we need six that's a good question. We've had a lot of volume last few years, that's made it easier.

<unk> indicated that we think volume is going to be slightly lower next year, but we do think we're going to be able to continue to grow insurance in force.

So it's something that I think a question that we're going to continue to get asked we're going to continue to look at but the math has to work from the loss of potential share of the two combined entities compared to the expense savings that you can have.

Okay now that makes sense and then just maybe just starting on the regulatory front I'll just very quickly was curious.

Any impact from recent developments.

I think like New York for example, being talking about requiring non banks to comply with the CRA and I know that wouldn't directly impact you, but could you have a knock on impact from that.

Yes, I mean again, it's a valid question and that just came out this week I think from a knock on effect, obviously, we're regulated.

Regulated by the state currently.

And so some states are more active than others. So I think it's something that we have a team that paid close attention to that I don't foresee any knock on effect from that per se I think it could lead to some of our discussions with <unk>.

Some of our customers as to how they participate in that space and how we can help.

But that is not a huge portion of our business at this point.

But we're well suited to be able to have those conversations with those customers as they want to engage on it and we are normally proactive with those customers and so it can create opportunity from a regulatory standpoint again, we try to stay abreast of what's happening out there I don't see a specific knock on effect out here.

That I'm concerned about.

Okay. That's helpful and then my last question.

And really kind of a big one in terms of just the premium rate right.

For the industry as a whole we understand.

I think people understand the dynamics of why it's declining but the bigger question I think is where does the inflows portfolio yields stabilize you used to give that disclosure niwa premium yields I don't know if you'd be willing to share your current quarter.

<unk> yield or just any thoughts you have on the way it portfolio yield.

Thank you.

Yes, I think when we look at portfolio yields we've talked.

Last few quarters about what the trend line is sort of a basis point a quarter.

And I think we would expect that as we move towards the end of this year as well.

We look at it from a forecasting standpoint. The reality is there is market dynamics that can impact that as well as sort of I would say that from a pricing market dynamic standpoint on new business, but also from a mix standpoint, as we transition to more purchase volume.

Traditionally that's going to come with a little bit higher LTV, a little bit higher premium.

And so that mix can impact sort of how the premium sort of moves which is why I think we're always a little bit I guess.

I guess reluctant to sort of go too far out of what might happen there, but again, it's a valid question. It's something that we look at it and we think about but then to ourselves. So the key focus is the returns that we're able to get off of the business.

From a capital deployed still feel extremely comfortable with the risk return equation that we're able to get and I think others are able to get in the industry right now.

Here. This is Mike maybe just to add onto that I mean, why why it is difficult is because were looking to predict prepayments for everyone. No prepayments of like the 2019 book and prior if you look at the last two years <unk> 2020, one it's about 65% of our current enforce so 35% from <unk> and prior.

As higher premium rates before the more granular pricing and the risk base and all those things have taken place I think the quarter Lastly, you'll go back last quarter by 40%. So that gets to be part of the struggle right in trying to forecast where things are at it's not only new business coming in.

But it's also the pace of Prepays of Oba.

And it's a long tail business. So that's what makes it more complicated.

And to try and give a more specific guidance.

Thank you for taking my questions.

Thanks.

Thank you. Your next question comes from the line of Ryan Gilbert. Your line is now open you may ask your question.

Hi, Thanks, Good morning, guys. Unfortunately, I jumped on the call late so I apologize if you've already answered this.

But is there any impact or benefit to your premium yield going forward from the kyocera terminations.

Okay.

Brian It's Nathan there will be a modest benefit one of the reasons why we elected to terminate those deals is that the prepayments out of those books had been so significant that they are just relatively small deals at this point.

<unk>.

Some of our older single vintage quota share deals, we had less optionality relative to reducing the quota share terminating so felt like I think in one case it was our only option.

So I do think Directionally. There is there is a positive there, but I think it's going to be it's going to be very modest and again that will still show up in the Q4 numbers, including the termination fee that we pay across those two deals which is 5 million combined.

So the favorable effect of not ceding premium under those deals won't really be until the first quarter of 'twenty two.

As I said, they've they've really run down quite a bit so theres not a lot of not a lot of volume in those from a premium standpoint or from say a P. Myers benefit standpoint at this point.

Okay got it.

Second question on <unk>, it looks like the 90, plus LTV and IW has been ticking up as a percentage of total over the course of 2021 is that just a function of home price appreciation and the characteristics of total origination volume or is that a more MTG strategy too.

I guess, capturing the best returns on that that would be in the market.

I would say the movement there has been as much about the market and thats sort of the move from a <unk>.

Bigger portion of rent IW being from refi to be more purchase driven.

And so just with the lack of Refis on average higher ltvs in that population, so I'd say that.

The biggest driver.

Okay great.

The last one for me is on I guess.

The relationship between premium yielded insurance enforced if I look at <unk>.

<unk> relative to <unk>, you have been able to offset.

Premium yields with higher.

The higher insurance in force do you think Thats a dynamic that can continue in <unk> and in 2022 or should we be thinking about.

Not getting enough persistency to offset premium yield compression ahead.

It's Nathan I'll take I'll take that one.

We've talked about Directionally, we think that we can continue to grow the insurance in force, although it may be at a more modest pace than we've had in recent quarters, where I think we are right now this quarter at 12% year over year growth.

So the.

If we're growing insurance in force and the question is we do expect that the in force yield will continue to decline, which one is happening.

At a faster pace and I think I think that's hard to judge but those are certainly offsetting factors, even if the premium yield does come down we think that will be mitigated by enforce growth over the next couple of quarters and then.

We've said as you get out beyond the next couple of quarters is just a function of so many things that.

I really market, driven and frankly, we got to happen. So it's really hard to predict.

Okay understood I appreciate the color. Thank you.

Thank you again, if anyone would like to ask a question you will need to press star one on the telephone Keypad next question comes from the line of Geoffrey Dunn. Your line is now open you may ask your question.

Thanks, Good morning.

First just typing your question Nathan, whereas the $5 million termination fee youre going to be booked in second one through premium are they satisfied.

Jeff It's Nathan there'll be on the premium line.

Okay.

And then as you think about your 2060 threes.

Are you spending your open market buyback activity or changing the parameters of <unk> one.

Dissipation of that or are you continuing with the same parameters you have for your Q3 ballpark.

I think the way that we've thought about that as well.

Once we've provided the redemption notice that that is kind of a period, where we could potentially be issuing stock wouldn't be appropriate for us to be repurchasing shares at least from our perspective at that time, but until the time that we provide the redemption notice, which again is after that kind of 20 or 30 trading day.

It's not really impacting kind of how we're thinking about share repurchase execution in the near term.

Okay.

And then the last thing I wanted to follow up on the question about M&A and I'm curious as you think about diversification.

Do you weigh the economic value.

Against the possible challenges of actually realizing that value with diversification kind of getting stuck and in multiple does that come into play as you consider diversification versus excess capital return to shareholders.

I guess I'd say comes into play in that when we look through the lens. It has to make sense as far as how it I think aligns with our business.

I do think it ultimately has to translate into value to our shareholders too and so I don't know if those are always mutually exclusive necessarily but it is a thought process in that.

Has to be meaningful in my opinion.

For it to really be diversification right. It can't be something that's small and that does not translate into value.

In the eyes of of.

Shareholders now my hope would be that.

Everything that we do.

Create value and that ultimately the shareholders' view it that way, but that's an important piece of the connection in my mind is that that you need to ultimately create that value for the shareholders and that's done through operating the business with where we are right now we feel very confident we're able to do that in and that we're also able to create value and returning the excess capital.

Yes, I think it's a factor when we think about diversification of and that create value ultimately for the for the business for the shareholders.

Okay. Thanks.

Sure.

Thank you we don't have any question.

As of the moment please continue presenters.

Okay, well I want to thank everybody for their interest in MGIC and hope everyone has a safe and healthy holiday season, as we move into the last part of the year. Thanks, everyone.

Thank you ladies and gentlemen that concludes today's conference call. Thank you all for participating you may now disconnect.

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