Q4 2021 MGIC Investment Corp Earnings Call

Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to the MGIT Investment Corporation fourth quarter 2021 earnings call.

Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation fourth quarter 2021 earnings call.

Speaker 1: At this time, all lines have been placed on mute to prevent any background

At this time all lines have been placed on mute to prevent any background noise.

Speaker 1: The end of the presentation will have a question in answers.

At the end of todays presentation, we will have a question and answer session to ask your question. During the session you will need to press star one on your telephone.

Speaker 1: To ask your questions during the session, you will need to press bar 1 on your telep.

Speaker 1: If you require any further assistance, please press star 0.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to Mike Zimmerman. Please go ahead.

Speaker 1: I would now like to hand the conference over to Mike Zimmerman. Please go ahead.

Thanks Jay.

Speaker 2: Thanks, Jay. Good morning and thank you for joining us this morning and for your interest in MGIC Investment Corporation.

And thank you for joining us this morning and for your interest in MGIC Investment Corporation.

Speaker 2: Joining me on the call today to discuss the results for the fourth quarter of 2021 are Chief Executive Officer Tim Metcke and Chief Financial Officer Nathan Coles.

Joining me on the call today to discuss the results for the fourth quarter of 2021, 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 Mgic's website, which is located at MTG MGIC Dot com includes additional information about the company's quarterly results that we'll refer to during the call and includes a reconciliation of non-GAAP financial measures to their most comparable.

Speaker 2: I want to remind all participants that our earnings release of last evening, which may be accessed on MGIC's website, which is located at mtg.mgic.com, includes additional information about the company's quarterly results that we will refer to during the call and includes a reconciliation of non-GAAP financial measures to their most comparable GAAP.

<unk> GAAP measures.

Speaker 2: We have posted on our website a presentation that contains information pertaining to our primary risk and force, new insurance written, re-insurance transactions and other information which we think you'll find valid.

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.

Speaker 2: I also wanted to remind listeners that from time to time we may post information about our underwriting guidelines and other presentations or corrections to pass presentations on our website that investors and other interested parties may find valuable.

I always I also wanted to remind.

But I just wanted to remind our listeners that from time to time, we may post information about our underwriting guidelines and other presentations or corrections to 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.

Speaker 2: 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 states.

Speaker 2: 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 8K that was filed last night.

Additional information about those factors, including COVID-19 that could cause actual results to differ materially from those discussed on the call are contained in the form 8-K that was filed last night.

Speaker 2: If the company makes any forward-looking statements, we're not undertaking an obligation to update those statements in the future in light of subsequent development.

If the company makes any forward looking statements, we're not undertaking an obligation to update those statements in the future in light of subsequent development.

Speaker 2: Further, no interested party 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 8K. With that, I'd like to turn the call over to Tim Matthews.

Further no interested party 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 8-K.

With that I'd like to turn the call over to Tim Mattke. Thanks.

Thanks, Mike and good morning, everyone.

Speaker 3: I'm pleased to report that we achieved very strong financial results in the fourth quarter. And for that matter, the full year of 2021.

I'm pleased to report that we achieved very strong financial results for the fourth quarter and for that matter the full year of 2021.

Speaker 3: These results reflect the solid credit quality of our growing insurance in force, a strong housing market, a decreasing delinquency rate, and our market presence, as well as the current favorable economic conditions.

These results reflect the solid credit quality of our growing insurance in force a strong housing market, the decreasing delinquency rate and our market presence as well as the current favorable economic conditions.

Speaker 3: After my opening remarks, Nathan will provide more detail about our financial results and review the progress we have made executing in our capital management strategy.

After my opening remarks, Nathan will provide more details on our financial results and review the progress we have made executing at our capital management strategy.

Speaker 3: Then before we open the line for questions, I'll wrap up by discussing the current operating environment, including activities related to housing finance policy.

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

Speaker 3: During the quarter, we earned gas net income of $174 million. Nearly 15% more than the same period last year. For the full year of 2021, gas net income increased 42% to $635 million compared to $446 million in 2020.

During the quarter, we earned GAAP net income of $174 million nearly 15% more than the same period last year.

For the full year of 2021, GAAP net income increased 42% to $635 million compared to $446 million in 2020.

Speaker 3: These strong quarterly and annual financial results improved primarily because losses incurred were materially lower when compared to the same periods of 2020. The improved credit performance reflects the lower level of new delinquency notices received throughout 2021 compared to 2020 and the improved cure rates on policies previously reported delinquency.

These strong quarterly and annual financial results improved primarily because of losses incurred were materially lower when compared to the same periods of 2020.

The improved credit performance reflects the lower level of new delinquency notices received throughout 2021 compared to 2020.

And the cure rates on policies previously reported delinquent.

Speaker 3: I am optimistic that the favorable delinquency trends that we have been experiencing will continue throughout 2022.

<unk> optimistic that the favorable delinquency trends that we have been experiencing will continue throughout 2022.

In addition to our improvement in losses incurred in 2021, we capitalize on one of the largest mortgage insurance market and the company's 65 year history by writing a record $120 billion of new insurance.

Speaker 3: In addition to our improvement in losses incurred, in 2021, we capitalized on one of the largest mortgage insurance markets in the company's 65-year history by writing a record $120 billion of new insurance, including 27 billion dollars.

$27 billion in the fourth quarter.

Speaker 3: This level of new business writings, combined with a higher annual persistency, resulted in our insurance enforce increasing to $274 billion, 11% higher than the same period last year.

This level of new business writings combined with a higher annual persistency resulted in our insurance in force increasing to $274 billion.

11% higher than the same period last year.

Speaker 3: Going into 2022, single-family housing demand remains strong, and interest rates, despite rising off recent lows, are still attracted by historical standards.

Going into 2022 single family housing demand remains strong and interest rates. Despite rising off recent lows are still attracted by historical standards.

The FHFA and the Gse's are increasing their focus on improving access to mortgages, especially for first time in low and moderate income borrowers the.

Speaker 3: The FHFA and the GSEs are increasing their focus on improving access to mortgages, especially for first-time and low- and moderate-income borrowers.

Speaker 3: The combination of these factors leads us to expect that the robust purchase mark the conditions will persist.

The combination of these factors leads us to expect that the robust purchase market conditions will persist.

That said, we do expect the overall market opportunity for private mortgage insurance will be smaller in 2022 rating just below the last two years of record volume. This reduction will be driven primarily by a decline in the number of refinance transactions compared to 2021.

Speaker 3: That said, we do expect the overall market opportunity for private mortgage insurance will be smaller in 2022, breaking just below the last two years of record volume. This reduction will be driven primarily by a decline in the number of refinance transactions compared to 2021.

Speaker 3: For some context, REFYS accounted for 20% of our total NIV in 2021, ranging from 40% in the first quarter to less than 10% in the fourth quarter.

For some context refis accounted for 20% of our total NSW in 2021, ranging from 40% in the first quarter to less than 10% in the fourth quarter.

Speaker 3: Based on the expected path of interest rates, we expect refinances to remain on the low end of the spectrum in 2022.

Based on the expected path of interest rates, we expect refinances to remain on the low end of the spectrum in 2022.

Speaker 3: The composition of our current application pipeline with more than 90% purchase transaction support that expectation.

The composition of our current application pipeline with more than 90% purchase transaction supports that expectation.

We currently expect that the new business, we write combined with increasing annual persistency where results in our insurance in force portfolio growing at a modestly slower pace to what we've recently experienced.

Speaker 3: We currently expect that the new business we write, combined with increasing annual persistency, will result in our insurance and forest portfolio growing at a modestly lower pace to what we have recently experienced.

Speaker 3: Taking a look at the performance of our Enforce portfolio, our loss ratio was a negative 10% in the quarter. This result reflects two things. First, our re-estimation of loss reserves and prior delinquencies resulted in favorable loss reserve development, primarily to reflect better than expected cure rates on loans that were delinquent in the third quarter of 2020 and prior.

Taking a look at the performance of our enforced portfolio our loss ratio was a negative 10% in the quarter.

<unk> reflects two things first our re estimation of loss reserves on prior delinquencies resulted in favorable loss reserve development, primarily to reflect better than expected cure rates on loans that were delinquent in the third quarter of 2020 and prior.

Speaker 3: Second, the number of neutral frequencies in the fourth quarter was low, reflecting the high quality of our insurance in four.

Second the number of new delinquencies in the fourth quarter with low reflecting the high quality of our insurance in force.

Speaker 3: I continue to be encouraged by the current business environment and the strength of our new business writing and the low level of new delinquent notices, notices, which has persisted throughout January .

I continue to be encouraged by the current business environment and the strength of our new business writings and the low level of new delinquent notices notices which has persisted throughout January .

Speaker 3: Last quarter we discussed that our capital management strategy centers on maintaining financial flexibility of both the holding company and the writing company to protect our policy holders and to create long term value for shareholders.

Last quarter, we discussed at 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.

Speaker 3: We believe this value can be created by writing more primary mortgage insurance, pursuing new business opportunities, retiring debt, paying dividends, repurchasing stock.

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

Speaker 3: During the quarter, reflecting our liquidity position, the strength of our balance sheet, and our expectations for continued favorable financial results, we execute on several of these options to increase the long-term value to shareholders of our company while maintaining exceptional financial strength.

During the quarter, reflecting our liquidity position the strength of our balance sheet and our expectations for continued favorable financial results. We executed on several of these options to increase the long term value to shareholders of our company, while maintaining exceptional financial strength.

Speaker 3: Specifically, MGIC paid a $250 million dividend to the whole income.

Specifically MGIC paid of $250 million dividend to the holding company we are.

Speaker 3: We also return a significant amount of capital to our shareholders through the repurchase of 9 million shares of Comments.com for $141 million. Repurchase of $99 million of par value of the 9% junior convertible to Ventures due in 2063, eliminating approximately 7.5 million potentially diluted shares. And the payment of our quarterly Comments.com dividends of $26 million.

Also return a significant amount of capital to shareholders through the repurchase of 9 million shares of common stock for $141 million.

Purchase of $99 million of par value of the 9% junior convertible debentures due in 2063, eliminating approximately $7 5 million potentially dilutive shares and the payment of our quarterly common stock dividends of $26 million.

Speaker 3: Finally, the board also recently declared an eight cents per share dividend payable on March 2nd of 2022.

Finally, the board also recently declared a <unk> <unk> per share dividend payable on March 2nd of 2022.

In the last two years, despite navigating through all the Covid related challenges, we reduced the number of fully diluted shares outstanding by 10% increase in the common stock dividend by 33% and increased book value per share by more than 22% after distributing $172 million in common stock dividends.

Speaker 3: In the last two years, despite navigating through all the COVID-related challenges, we reduced the number of fully diluted shares outstanding by 10 percent, increasing the Common Stock Dividend by 33 percent, and increased book value per share by more than 22 percent after distributing $172 million in Common Stock Dividends. Nathan will go over more details.

Nathan will go over more detail on these actions in a minute.

We believe that our capital management strategy will allow us to take advantage of near term opportunities to write significant amount of new business that meets our return objectives, while continuing to create long term value for shareholders and remaining well capitalized insurance counterparty.

Speaker 3: We believe that our capital management strategy will allow us to take advantage of near-term opportunities to write significant amount of new business that meets our return objectives while continuing to create long-term value for shareholders and remaining a well-capitalized insurance counterparty.

Speaker 3: In summary, we have a strong and dynamic balance sheet, we're confident in our positioning in this market, and we like the risk-reward equation that the current business conditions offered and are excited about the future. So with that, let me turn it over to Nathan.

In summary, we have a strong and dynamic balance sheet, we're confident in our positioning in this market and we like the risk reward equation that the current business conditions offered and are excited about the future. So with that let me turn it over to Nathan.

Thanks, Tim and good morning.

Speaker 4: Tim mentioned we ended 2021 with another quarter of strong financial results.

Jim mentioned, we ended 2021 was another quarter of strong financial results.

Speaker 4: In the fourth quarter, we earned $174 million in net income, or $0.52 per diluted share, and generated an annualized 16.6% return on beginning shareholders equity.

In the fourth quarter, we earned $174 million of net income or <unk> 52 per diluted share and generated an annualized 16, 6% return on beginning shareholders' equity.

Speaker 4: For the full year, net income was $635 million, or $1.85 per diluted share, compared to $446 million, or $1.29 per diluted share in 2020.

For the full year net income was $635 million or $1 85 per diluted share compared to $446 million or $1 29 per diluted share in 2020.

Speaker 4: The return on beginning shareholders equity was 13.5% in 2021 compared to 10.4% last year.

The return on beginning shareholders' equity was 13, 5% in 2021 compared to 10, 4% last year.

Speaker 4: On an adjusted net operating income basis, in the fourth quarter we earned $0.61 per diluted share versus $0.43 per diluted share in 2020.

On an adjusted net operating income basis in the fourth quarter. We earned <unk> 61 per diluted share versus <unk> 43 per diluted share in 2020.

Speaker 4: For the full year, we earned $1.91 per diluted share versus $1.32 in 2020.

For the full year over year, and $1 91 per diluted share versus $1 32 in 2020.

Speaker 4: The detailed reconciliation of gap net income to adjusted net operating income can be found in the press room.

A detailed reconciliation of GAAP net income to adjusted net operating income can be found in the press release.

During the quarter total revenues were $294 million compared to $302 million last year.

Speaker 4: During the quarter total revenues were $294 million compared to $302 million last year.

The net premium yield for the fourth quarter was 37, three basis points, which was down $1 one basis points compared to last quarter and down five six basis points from the fourth quarter of 2020.

Speaker 4: The net premium yield for the fourth quarter was 37.3 basis points, which was down 1.1 basis points compared to last quarter and down 5.6 basis points from the fourth quarter...

Speaker 4: Decreasing the net premium yield continues to be primarily the result of a decline in the enforced premium yield as the older policies continue to run off and be replaced with policies which generally have lower premium rates.

The decrease in the net premium yield continues to be primarily the result of a decline in the in force premium yield as the older policies continue to run off and be replaced with policies, which generally have lower premium rates.

The low level of refinance activity decrease the amount of accelerated premiums earned from single premium policy cancellations.

Speaker 4: The low level of refinance activity decreased the amount of accelerated premiums earned from single premium policy canceling.

Speaker 4: During the quarter, they were $18 million, which was flat the last quarter, but down from $32 million earned in the fourth quarter of 2020.

During the quarter, they were $18 million, which was flat to last quarter, but down from $32 million earned in the fourth quarter of 2020.

We expect that as the older vintages continue to run off the in force premium yield will continue to decline throughout 2022 at a similar pace that it did in 2021.

Speaker 4: We expect that as the older vintages continue to run off, the enforced premium yield will continue to decline throughout 2022 at a similar pace that it did in 2021.

On the reinsurance front.

Speaker 4: We have agreed to terms to place both an additional 15% quota share on our 2022 NIW, bringing the total quota share to 30% and a 15% quota share on our 2023 NIW.

We have agreed to terms to place both an additional 15% quota share on our 2022 and IW, bringing the total quota share to 30%.

And a 15% quarter share on our 2023 and <unk>.

Speaker 4: During the quarter, operating expenses were $46 million, compared to $48 million for the same period last year.

During the quarter operating expenses were $46 million compared to $48 million for the same period last year for the full year operating expenses were $211 million.

Speaker 4: full year operating expenses were $211 million versus $189 million.

Versus $189 million in 2020.

Speaker 4: The majority of the year-over-year increase was a result of investments we were making in our technology and data and analytics infrastructures, which are already paying dividends in how we approach the market.

The majority of the year over year increase was a result of investments we are making in our technology and data and analytics infrastructures, which are already paying dividends and how we approach the market.

The lower level of expenses in the fourth quarter was largely due to timing and certain onetime items that we do not expect to recur.

Speaker 4: The lower level of expenses in the fourth quarter was largely due to timing and certain one-time items that we do not expect to recur.

Speaker 4: For the full year 2022, we expect that operating expenses will be in the $225 million to $230 million range as we continue investing in our platform.

For the full year 2022, we expect that operating expenses will be in the 225 million to $230 million range as we continue investing in our platform.

Speaker 4: Over time, we continue to expect the level of incremental spending to decline as some of these transformational initiatives are completed and we realize the full value from these investments.

Over time, we continue to expect the level of incremental spending to decline at some of these transformational initiatives are completed and we realize the full value from these investments.

Shifting over to credit.

Speaker 4: Net losses incurred were negative $25 million in the fourth quarter, compared to $20 million last quarter and $46 million in the fourth quarter last year.

Net losses incurred were negative $25 million in the fourth quarter compared to $20 million last quarter and $46 million in the fourth quarter last year.

Speaker 4: In the quarter we received approximately 10,500 new delinquency notices, which represent plus than 1% of the loans insured at the start of the quarter.

In the quarter, we received approximately 10500, new delinquency notices which represents less than 1% of the loans insured at the start of the quarter.

Speaker 4: Well, up from the 9,900 new notices received in the third quarter, the number received is 31% less than the number of notices received in the fourth quarter of 20 2022 % less than we received in the fourth quarter of 2019.

While up from the 9900, new notices received in the third quarter. The number received is 31% less than the number of notices received in the fourth quarter of 2020, and 22% less than we received in the fourth quarter of 2019.

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 I believe they are good indicators of near term credit performance.

Speaker 4: We are encouraged by the strength of the housing market and the credit trends we are experiencing, including the low level of early payment defaults, and believe they are good indicators in your term credit performance.

Speaker 4: The estimated claim rate on new notices received in the fourth quarter of 2021 was approximately 7.5%.

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

Speaker 4: The claim rate on new notices has been at this level since the fourth quarter of 2020.

The claim rate on new notices has been at this level since the fourth quarter of 2020.

In the quarter, our re estimation of loss reserves on prior delinquencies resulted in $52 million of favorable loss reserve development net of reinsurance compared to $8 million of favorable development last quarter, an immaterial unfavorable development in the fourth quarter last year.

Speaker 4: In the quarter, our re-estimation of loss reserves on prior delinquencies resulted in $52 million of favorable loss reserve development net of reinsurance.

Speaker 4: compared to 8 million of favorable development last quarter and immaterial unfavorable development in the fourth quarter last year.

Favorable development in the quarter was primarily related to delinquency notices received in the third quarter of 2020 and prior.

Speaker 4: Favorable development in the quarter was primarily related to delinquency notices received in the third quarter of 2020 and prior.

Speaker 4: Cur activity to date on those the linkancies has exceeded our expectations and as a result we've adjusted our ultimate loss expectations down

Secure activity to date on those delinquencies has exceeded our expectations and as a result, we've adjusted our ultimate loss expectations down.

For all of 2021 incurred losses totaled $65 million compared to $365 million in 2020.

Speaker 4: We're all of 2021 incurred losses totaled $65 million compared to $365 million in 2020.

Speaker 4: The lower level of incurred losses was primarily a result of the 60% fewer new notices we received in 2021 compared to 2020, stable claim rate on those new notices, and 60 million dollars in total losses.

The lower level of incurred losses was primarily result of the 60% fewer new notices we received in 2021 compared to 2020 state.

Stable claim rate on those new notices and.

$60 million of favorable loss reserve development.

Of the approximately 33000 loans in our delinquency inventory at December 31.

Speaker 4: Of the approximately 33,000 loans in our delinquency inventory at December 31st, approximately one-third or 11,000 loans were reported to us to be in forbearance. And we estimate that the majority of those loans in forbearance will reach the end of their forbearance period by the middle of 2022.

Approximately one third or 11000 loans were reported to us to be in forbearance and we estimate that the majority of those loans in forbearance will reach the end of their forbearance period by the middle of 2022.

Speaker 4: The number of claims received in the quarter remained very low. We continue to expect claim payments to remain low for the next few quarters, given the timelines for closure and evictions associated with GSE loans.

The number of claims received in the quarter remained very low and we continue to expect claim payments to remain low for the next few quarters, given the timelines for foreclosure and eviction associated with GSE loans and the additional procedural safeguards imposed by the CFPB.

Speaker 4: and the additional procedural safeguards imposed by the CFPB.

Primary paid claims in the quarter was $60 million compared to $18 million last quarter and $12 million in the fourth quarter of 2020.

Speaker 4: Primary paid claims in the quarter were $60 million compared to $18 million last quarter and $12 million in the fourth quarter of 2020.

Speaker 4: Next, I want to spend a couple minutes talking about our capital management strategy and the capital actions we have recently taken.

Next I want to spend a couple of minutes talking about our capital management strategy and the capital actions, we have recently taken.

I mentioned last quarter, the both our capital levels at MGIC and liquidity levels at the holding company were above our targets.

Speaker 4: I mentioned last quarter that both our capital levels at MGIC and liquidity levels at the holding company were above our target.

Speaker 4: As a result, in the fourth quarter, we received OCI approval and paid a $250 million dividend from MGIC to the holding company. The holding company executed on several capital management actions in the quarter.

As a result in the fourth quarter, we received OCI approval compared to $250 million dividend from MGIC to the holding company and the holding company executed on several capital management actions in the quarter.

As Tim mentioned in the fourth quarter, we paid an <unk> <unk> per share dividend.

Speaker 2: As Tim mentioned, in the fourth quarter we paid an eight cent per share dividend.

Speaker 4: for a total of $26 million and repurchased 9 million shares of common stock for $141 million.

For a total of $26 million and repurchased 9 million shares of common stock for $141 million.

Speaker 2: For the full year of 2021, we paid $94 million in common stock dividends and repurchased 19 million shares of common stock for $291 million.

For the full year of 2021, we paid $94 million in common stock dividends and repurchased 19 million shares of common stock for $291 million.

The 19 million shares repurchase was approximately five 6% of the number of shares outstanding at the beginning of the year.

Speaker 4: The 19 million shares repurchase was approximately 5.6% of the number of shares outstanding at the beginning of the year.

Speaker 2: During the quarter, we also repurchased $99 million par value of our 9% junior convertible to ventures due in 2063.

During the quarter, we also repurchased $99 million par value of our 9% junior convertible debentures due in 2063.

Speaker 4: I mentioned last quarter that retiring the ventures was a priority for us, and the repurchases in December eliminated 7.5 million potentially dilutive shares, reduced our annualized interest expense by $9 million, and reduced our year-on-debt-to-capital ratio by 130 basis points on a pro-forma basis to a level below 20%.

I mentioned last quarter that retiring the debentures was a priority for us and the repurchases in December eliminated $7 5 million potentially dilutive shares reduced our annualized interest expense by $9 million and reduced our year end debt to capital ratio by 130 basis points on a pro forma basis to a level below 20% at year end.

Speaker 2: We expect to continue to de-lever over time and to approach a longer-term debt-to-capital ratio in the low-to-mid-term.

We expect to continue to delever over time and to approach a longer term debt to capital ratio in the low to mid teens.

Speaker 4: At year end, our holding company's $663 million of liquidity exceeded our target, and we continued our share repurchase program in 2022. We'll be purchasing 3.9 million shares for $60 million in January .

At year end, our holding company's $663 million of liquidity exceeded our target and we continued our share repurchase program in 2022, repurchasing $3 9 million shares for $60 million in January .

Speaker 2: The Board also recently declared an 8 cent per share dividend payable on March 2nd.

The Board also recently declared a <unk> <unk> per share dividend payable on March 2nd.

Circling back to the debentures as a reminder, we can redeem the remaining debentures for principal plus accrued interest on our share price closes above a certain level for 20 or 30 consecutive trading days.

Speaker 2: Circling back to the debentures, as a reminder, we can redeem the remaining debentures for principal plus accrued interest when our share price closes above a certain level for 20 of 30 consecutive trading days.

Speaker 2: 2022, that share price level is $16.98.

For 2022 that share price level of $16 98.

We recently, we currently expect to provide a redemption notice for the debentures when that requirement is met with a redemption date at least 30 days later.

Speaker 2: We currently expect to provide a redemption notice for the debentures when that requirement is met, with a redemption date at least 30 days later.

If we were to provided the redemption notice we would expect virtually all of the holders of the debentures would elect to convert their debentures and the common stock before the redemption date.

Speaker 2: We would expect virtually all of the holders of the debentures would elect to convert their debentures into common stock before the redemption date.

Speaker 2: Under the terms of the adventures, we may pay cash in lieu of issuing shares and we would expect to do so.

Under the terms of the debentures, we may pay cash in lieu of issuing shares and we would expect to do so.

Speaker 2: At year-end, our rating company had $2.2 billion of available assets in excess of the PMIR's minimum requirements, or a sufficiency ratio of 160 percent, which exceeded our current target level.

At year end, our rating company had $2 2 billion of available assets in excess of the <unk> minimum requirements or sufficiency ratio of 160%, which exceeded our current target level.

Mgic's Pmiers available assets were relatively flat during the quarter as the $250 million dividend to the holding company was largely offset by strong cash flow from operations.

Speaker 2: From GICs, PMIER's available assets were relatively flat during the quarter as the $250 million dividend to the holding company was largely offset by strong cash flow from operations.

Speaker 2: NGIC's level of PMIRS access decreased during the quarter as its minimum required assets increased due to the growth of its risk and force, the cancellation of two quarter share reinsurance agreements, and the runoff of the PMIRS benefit on existing ILN deals.

Gse's level of P Myers excess decreased during the quarter as its minimum required assets increased due to the growth of its risk enforce the cancellation of two quota share reinsurance agreements and the runoff of the P Myers benefit on existing island deals.

Speaker 2: The current macroeconomic environment persists. We expect MGIC will continue to increase the amount of its capital in excess of its target level.

The current macroeconomic environment persists, we expect MGIC will continue to increase the amount of its capital in excess of its target level.

Speaker 2: We will continue to assess MGIC's capital position and we'll continue discussions with our regulator, the OCI, about additional dividends to our holding company as appropriate.

We will continue to assess mgic's capital position and we'll continue discussions with our regulator the OCI.

Additional dividends to our holding company as appropriate.

Speaker 2: As I mentioned last quarter, we expect any dividends to occur less frequently than the quarterly cadence we had pre-COVID.

As I mentioned last quarter, we expect any dividends to occur less frequently than the quarterly cadence we had pre COVID-19 .

We continue to believe that our balanced approach to maintaining a strong capital position, including using forward commitment quota share treaties accessing the capital markets for excess of loss reinsurance via island transactions provides flexibility to maximize the long term value of both the writing company and holding company.

Speaker 2: We continue to believe that our balanced approach to maintaining a strong capital position including using forward commitment quarter share treaties, accessing the capital markets for excess of loss reinsurance via ILN transactions.

Speaker 2: provide flexibility to maximize the long-term value of both the writing company and holding company.

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

Speaker 2: Its value can be created by writing more primary mortgage insurance, pursuing new business opportunities.

Speaker 3: retiring debt, paying dividends, or repurchasing stock. And with that, let me turn it back to Tim. Thanks, Nathan. Before moving to

And with that let me turn it back to Tim.

Nathan before.

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

Speaker 3: The federal government, through various agencies including the FHFA, CFPB, and the FHA, continues to focus its housing policy efforts on promoting equitable access to sustainable and affordable housing.

The federal government through various agencies, including the FHFA CFPB and the FHA continues to focus its housing policy efforts on promoting equitable access to sustainable and affordable housing mitigating foreclosure and eviction risk for homeowners impacted by COVID-19, and ensuring a successful economic recovery as opposed to making large scale changes to housing.

Speaker 3: mitigating foreclosure and eviction risk for homeowners impacted by COVID-19.

Speaker 3: and ensuring a successful economic recovery as opposed to making large-scale changes to the housing finance infrastructure.

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.

Speaker 3: We will continue to advocate for the increased use of private mortgage insurance in the housing finance industry in order to reduce taxpayer exposure to housing while still maintaining a resilient housing finance system.

Speaker 3: At MGIC, we are focused on providing critical support to the housing market, especially low and moderate income and first-time homebuyers.

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

Speaker 3: We had a very successful year. We wrote a record $120 billion of new business.

We had a very successful year with a record $120 billion of new business.

Speaker 3: grew our insurance-enforced book by 11%, generated $635 million of net income, delivered a 13.5% return on equity, improved book value per share by 9.3%, and reduced the number of shares outstanding by 5.4%.

Our insurance in force book by 11% generated $635 million of net income delivered a 13, 5% return on equity.

Book value per share by nine 3% and reduced the number of shares outstanding by five 4%.

Speaker 3: Longer term, I remain encouraged about the future role that our company and industry can play in housing finance and believe that many regulators and policymakers share a similar view as our company and industry are organized solely to provide credit enhancement solutions to lenders, borrowers, and the GSEs in all economic cycles.

Longer term I remain encouraged about the future role that our company and industry can play in housing finance and believes that many regulators and policymakers share a similar view as our company and industry are organized solely to provide credit enhancement solutions to lenders.

<unk> and <unk> in all economic cycles.

Speaker 3: Not only does private mortgage insurance offer dedicated capital day in and day out to the housing industry, it also offers many solutions and a great value proposition for lenders and consumers to overcome the number one barrier to home ownership, the down payment.

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

Speaker 3: In summary, we are currently writing high levels of quality new insurance and are experiencing low levels of delinquency.

In summary, we are currently writing high levels of quality new insurance.

Experiencing low levels of delinquencies.

Speaker 3: The housing market remains robust and we have a book of business that has strong underlying credit characteristics.

The housing market remains robust and we have a book of business that are strong underlying credit characteristics, which is supported by a strong and dynamic balance sheet with a low debt to capital ratio and investment portfolio of nearly $7 billion.

Speaker 3: supported by a strong and dynamic balance sheet with a low debt-to-capital ratio, an investment portfolio of nearly $7 billion, contractual premium flow, and a robust reinsurance program.

Contractual premium flow and a robust reinsurance program.

I am confident in our positioning in this market and we like the risk reward equation that the current conditions offer we have the right team in place to build off our solid foundation to continue to deliver competitive offerings and our best in class service to our customers and generate strong returns for our shareholders through the core business as well as capital returns.

Speaker 3: I am confident in the positioning in this market, and we like the risk-reward equation that the current conditions offer. We have the right team in place to build off our solid foundation to continue to deliver competitive offerings and our best-in-class service to our customers and generate strong returns for our shareholders through the core business, as well as capital returns.

With that operator, let's take questions.

Thank you and as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad.

Speaker 1: Thank you, and as a reminder, if you would like to ask a question, please press star, then the number one on your telephone keypad. Our first question comes from the line of Doug Harder of Credit Suisse. Your line is open.

Our first question comes from the line of Doug Harter with Credit Suisse. Your line is open.

Speaker 2: uh... thanks uh... in your prepared remarks you mentioned that you expect the enforced yield to continue to decline thirty cents you can give us uh... to maybe over the course of twenty one where uh... the the yielded on on new insurance written verses the enforce field just to get a sense of magnitude as to you know where the

Thanks in your prepared remarks, you mentioned that you expect the enforce yield to continue.

Klein is there any sense you can give us as to maybe over the course of 'twenty one where.

The yield is on new insurance written versus the enforce yield just to get a sense of magnitude as to.

Where that ultimately might level out.

Speaker 2: Hey Doug, it's Nathan. Thanks for the question. We haven't disclosed what the current rate on new business is, but we saw the in-force yield come down about a basis point, a quarter, throughout 2021. That's kind of what we think is the most likely scenario for 2022.

Hey, Doug it's Nathan Thanks for the question, we haven't we haven't disclosed what the kind of current rate on new businesses, but we saw the enforced yields come down about a basis point a quarter.

Throughout 2021, that's kind of what we're what we think is the most likely scenario for 2022.

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Great and then I guess on the.

Speaker 5: And then I guess on the single premium cancellation, given that rates have kind of already risen, has that kind of stabilized, or is there more pressure? Is that number set to come down as well?

Single premium cancellation, given given that rates have kind of already risen has that kind of stabilized or is there more pressure as that number start to come down as persistency improves further.

Yes, it's Nathan again, I think that.

Speaker 4: Yeah, it's Nathan again. I, I think that, you know, even in environments with, you know, flat or even rising rates, we will see some level of accelerated single cancellation just as we see some level of, you know, kind of normal fall off. But the level that we're seeing now, you know, reflects an environment where we had less than 10% refinance transaction. So, you know, could it go lower from here? You know, certainly, but, you know, I don't think it's, it's not as if it's going to go to zero just because rates are rising.

Even in environments with flat or even rising rates, we will see some level of accelerated single cancellation, just as we see some level of kind of normal fall off.

But the level that we're seeing now reflects an environment, where we had less than 10% refinance transactions. So.

Could it go lower from here, certainly, but I don't think its not as if it's going to go to zero just because rates are rising.

That's helpful. Thank you Nathan.

Speaker 1: Thank you. Our next question comes from the line of Colin Johnson of Briley. Your line is.

Thank you. Our next question comes from the line of Colin Johnston Riley Your line is open.

Speaker 6: Hey, good morning, thanks for taking my questions. You know, when you look at the percentage of risk and force, the concentrated in the policy years 2020 and 2021, at about 70%, that, you know, it kind of appears high for any two policy years just by historical levels. So I'm curious to how do you think about maybe that level of concentration risk, so to speak, in those two policy years going forward?

Hey, good morning, Thanks for taking my questions.

When we look at the percentage of risk in force. It's concentrated in the policy years 2020 in 2021 all right about 70% that it kind of appears high for any two policy years, just by historical levels. Some I'm curious how do you think about maybe that level of concentration risk so to speak in those two.

Policy years going forward.

Speaker 3: It's a good question. I think it's something we're cognizant of, right, and two of the biggest sort of markets in our history.

Tim It's a good question I think it's something we're cognizant of right.

The biggest sort of markets.

Our history.

Speaker 3: Um, you know, I think we're, we also look at 2022, as we said, we think that's going to be another large market. So we think about sort of temporal diversification that you'll have with that.

I think we also look at 2022 as we said, we think thats going to be another large market. So we think about sort of temporal diversification that youll have with that.

Speaker 3: I think, ultimately, we also look at the underlying credit quality of those books of business and have...

I think ultimately we also look at the underlying credit quality of those books of business in half.

Speaker 3: great amount of confidence in what the credit quality is, absent what's happened with home price appreciation.

Right amount of confidence in what the credit quality is absent what's happened with home price appreciation, but obviously with the home price appreciation that's happened over the last couple of years.

Speaker 3: But obviously, with the home price appreciation that's happened over the last couple of years, feel good, especially about the 2020 book of business that would have been originated sort of prior to a lot of that sort of appreciation happening. So while it's something we do keep an eye on, it's something I would say that we're not concerned about based upon all those sort of qualities that I discussed.

Feel good, especially about the 2020 book of business that would've been originated.

Prior to a lot of that sort of depreciation happening. So while it's something we do keep an eye on it's something I'd say that we're not concerned about based upon all of those sort of qualities that I discussed.

Got it. Thank you that's helpful. And then the release kind of mentioned that you terminated the 2017 2018, Q ISR transactions in the quarter I'm just curious maybe what drove that decision or maybe just more broadly what are the advantages of ending in Q S. Our policy early.

Speaker 6: Got it. Thank you. That's helpful. And then the release kind of mentions that you terminated the 2017 and 2018 QSR transactions in the quarter. I'm just curious maybe what drove that decision or maybe just more broadly, what are the advantages of ending a QSR policy early?

Yes, Colin it's Nathan.

Speaker 2: We mentioned last quarter on the call that we had

We mentioned last quarter on the call that we had.

I'd like to cancel those we had to give a kind of a notice period, but I think the rationale was really that because of the large amounts of run off out of those broke years. Those deals have just gotten relatively small each one was providing maybe less than $50 million of P. Myers benefit for us so partially administratively feel really.

Speaker 4: Elected to cancel those we had to give a kind of a notice period but I think the the rationale is really that because of The the large amounts of runoff out of those book years those deals had just gotten

Speaker 5: relatively small. Each one was providing maybe less than $50 million of PMIRES benefit for us. So partially, administratively, feel really comfortable coming back onto risk from loans that were written in 2017 and 2018. Just felt like the right answer for us from a – and I think given our capital position could certainly absorb taking on that incremental risk as well. Okay, great. That makes sense.

Comfortable coming back onto risk from loans that were written in 2017 and 2018.

Just felt like the right answer for us from a and I think given our capital position could certainly absorb taking on that that incremental risk as well.

Okay, great that makes sense. Thanks, those are all my questions.

Thanks.

Speaker 1: Thank you. Next question comes from the line of Mark De Vries of Barclays. Your line is open.

Thank you next question comes from the line of Mark Devries.

With Barclays. Your line is open.

Yes, Thanks actually I have a couple of follow ups on topics already addressed.

Speaker 7: Yeah, thanks. Actually, I have a couple of follow-ups on topics already addressed. On the average premium, you know, Nathan, my understanding is that one of the headwinds has been the accelerated kind of runoff of higher premium business written in the past. Wouldn't you expect that headwind to at least fade some as we go into 2022 as refinance really falls off?

Average premium.

No Nathan my understanding is that one of the headwinds has been the accelerated kind of run off of higher premium business written in the past wouldn't you expect that.

Headwind to at least fade some as we go into 2022 as refinance really falls off.

Speaker 4: Yeah, no, Mark, it's a good question. I do think, you know, we do expect that 2022 is going to be a large market as well. You know, some of that may may start to fall off a little bit. But, you know, current, you know, current new business is being written below the average enforced yield. So we do think that just naturally, it's going to continue to come down.

Yes, no mark it's a good question I do think we do expect that 2022 is going to be a large market as well.

Some of that May start to.

Fall off a little bit but current.

Current new business is being written below the average enforced yields. So we do think that just naturally it's going to continue to come down.

Speaker 4: uh... you know certainly have a lot more conviction that over the next quarter to then beyond that just because market dynamics of all the size of the market and ralph et cetera

Certainly have a lot more conviction in that over the next quarter or two then beyond that just because market dynamics evolve and the size of the market and run off et cetera, but.

Speaker 4: But I think, you know, continuing to guide to about a basis point a quarter for us on the enforced yield coming down through 2022.

But I think continuing to guide to about a basis point a quarter for us on the enforce yield.

Coming down through 2022.

Speaker 7: okay got it uh... and then could you discuss one impact you know high h pa we've seen it having on the quality of the borrowers are ensuring or our higher prices pushing out lower income bars and and maybe pushing some higher income bars into you know needing loans with m i who might have otherwise had enough money to kind of put down uh... to buy home

Okay got it.

And then could you discuss what impact hi, HPA, we've seen is having on the quality of the borrowers are ensuring or our higher prices pushing out lower income borrowers and maybe pushing some higher income borrowers into meeting.

Loans with that mind, who might have otherwise had enough money to kind of put down to buy a home.

Hey, Mark it's Mike.

Speaker 8: You know, on the margin, I'll say yes to that, and you can kind of see that reflective.

On the margin I'll say, yes to that and you can kind of see that reflective.

Speaker 8: I'd say really in any purchase market, but certainly because of the HPA over the last couple of years, it's probably tightened that a little bit more, but you see a little bit of drift up in the percentage of DTIs, you know, above 45, which for us still remains, you know, pretty low, you know, somewhere around, you know, 14, 15 percent or so, or above that 45 percent, a little bit lower.

It really in any purchase market, but certainly because of the HPA over the last couple of years, it's probably tighten that a little bit more but do you see a little bit of drift up in the.

Percentage of DTI.

<unk> 45.

Which for us still remains pretty low.

Somewhere around $14 15, percenters are above the above that 45% little bit lower.

Speaker 8: are a little bit higher on the LTV. So I'd say on the margin, that's the case, but we haven't seen a broad swath of, or when you look at the FICO distributions and things of that nature, there's not material changes.

On the are a little bit higher on the LTV, So I'd say on the margin.

That's the case, but we haven't seen a broad swath of.

And when you look at the FICO distributions and things of that nature, there's not.

Material changes there, but certainly on the margin.

Speaker 7: yeah and and then just a related question that how do you think about the impact of that each pa on risk and obviously it's a unmitigated positive for your existing risk but when you think about writing new business on prices which are up twenty percent year-of-year how do you think about kind of the the risk of a correction what that could do for

Yeah, and then just a related question on that how do you think about the impact of that HPA on risk obviously.

Integrated positive for your existing risk, but when you think about writing new business on prices, which are up 20% year over year.

Do you think about kind of the risk of a correction of what that could do for credit on new business.

Speaker 3: Yeah, Mark, it's Tim. I mean, it's something that we have to think about, right? It's with, as with any sort of asset, when when there's

Mark It's Tim it's something that we have to think about right with it as with any sort of.

<unk>.

Increased depreciation do you think about what's the stress scenarios can be and what sort of peak to trough can be I think we feel pretty confident in the work. We do on stress scenarios that we're taking that into account in our pricing dynamics and feel like we still are really good risk return equation.

Speaker 3: increased appreciation, you think about what the stress scenarios can be and what sort of peak to trough can be. I think we feel pretty confident in the work we do on stress scenarios that we're taking that into account in our pricing dynamics and feel like we still are in a really good risk-return equation. But I think you're right. When you think about home price appreciation, it makes you feel really good about

But I think Youre right. When you think about home price appreciation and makes you feel really good about the books of business you've already written but you have to I mean, what we're focused on always is what does it do to the pricing now and still feel really confident about sort of pricing dynamics to be able to get the right return even with I think it's safe to say.

Speaker 3: the books of business you've already written, but you have to, I mean, what we were focused on always is what does it do to your pricing now, and still feel really confident about sort of pricing dynamics to be able to get the right return, even with, I think it's safe to say, you know, you can...

You can pay worst stress scenarios, although with a credit quality of the book of business I think it's tough to paint really dire sort of.

Speaker 3: worse stress scenarios, although with the credit quality of the book of business, I think it's tough to paint really dire sort of stress scenarios for us, especially when we consider all the reinsurance we have behind our books of business as well.

Stress scenarios for us, especially when you consider all of the reinsurance we have behind.

Our books of business as well.

Okay Alright.

Speaker 8: Okay. That's helpful. Mark, I was just going to add on that with the reinsurance comment that Tim made there too. A lot of the focus over the last, you know, recent periods have been about the capital benefits of the reinsurance, but obviously there's, you know, there's multiple values of having programs in place that, to Tim's point. Yeah.

Alright.

Add that with the reinsurance comment that I made there too great a lot of the focus over the last.

Recent periods a bit about the capital benefit of the reinsurance, but obviously there is.

There's multiple values of having a program in place that to Tim's point.

Yeah makes sense. Thank you.

Sure.

Speaker 1: Thank you. Next question comes from the line of post George of KVW. Your line is open.

Thank you next question comes from the line of both storage of key VW. Your line is open.

Okay.

Bose.

Speaker 5: Hey, guys, can you hear me? Yeah. Yeah. There you are. Great. Yeah. First, actually, can you just talk about, you know, how we could think about the size of potential dividends up to the holding company this year, you know, relative to what you, you know, paid back, paid in 2021?

Hey, guys can you hear me yes.

Yes.

Great.

First thing can you just talk about.

How we could think about.

Size of potential dividends up to the holding company this year relative to what you paid back paid in 2021.

Speaker 2: poses Nathan, I'll take that one. You know, I think like we've said for some time, it's really going to be dependent on

This is Nathan I'll take that one.

I think like we've said for some time, it's really going to be dependent on the capital situation.

Speaker 2: the capital situation that we are throughout the year. So if we're in a favorable macroeconomic environment, we do think that we're going to continue to generate capital above our target levels. That will be supportive of dividends, and we've shown.

Tuition that we are throughout the year.

So if we're in a favorable macroeconomic environment, we do think that we're going to continue to generate capital above our target levels that will be supportive of dividends and we've shown in the last half of this year that we can pay dividends.

Speaker 2: in the last half of this year that we can pay dividends at a fairly high rate. But I think first order condition there is that the environment is attractive for us and that we think we have excess capital. So that's an evaluation that we'll continue to make. And if appropriate and if we can get the approvals from our regulators, we'll look to continue to pay dividends.

At a fairly high rate, but I think first order condition. There is that the environment is attractive for us and that we think we have excess capital. So that's an evaluation that we'll continue to make.

And if appropriate and if we can get the approvals from our regulators.

We will look to continue to pay dividends.

And just to follow up on that I mean, the dividends in the back half of 'twenty one.

Speaker 5: And just to follow up on that, I mean, the dividends in the back half of 21, you know, I guess, was that some...should we think of that as a bit of a catch-up in the sense of that's, you know, maybe that's more of an annualized level of payout that you did, I guess, effectively 400 million for the year?

I guess was that too should we think of that is bit of a catch up in a sense. If that's maybe that's more of an annualized level of payout that you did this I guess effectively $400 million for the year.

Yes, again, I would I would just point to given our capital position.

Speaker 2: Yeah, again, I would I would just point to given our capital position at, you know, at both the end of the second quarter and the end of the third quarter, felt comfortable with the $150 million dividend. And then the $250 million dividend, we'll continue to reassess. And if we think that our capital position and the environment supports dividends at that level, or higher or lower, then that's kind of the path that we'll follow going forward.

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By the end of the second quarter and the end of the third quarter felt comfortable with the $150 million dividend and then the $250 million dividend.

We'll continue to reassess and if we think that that our capital position and the environment supports dividends at that level or higher or lower than that as kind of the path that will follow going forward.

Speaker 5: So, okay, thanks. And then actually just one on market share. I mean, I guess it's early to tell, but your NIW came in a little better than we'd expected. Just curious your thoughts on how you see your share in the market, and then also on a related note, just on the bulk market, how is that trending, or is that moving share around a little bit as well? Thanks.

Okay. Thanks, and then actually just one on market share I mean, I guess, it's early to tell but it look youre in IW came in a little better than we had expected.

Various your thoughts on how you see your share.

In the market and then also unrelated note just on the bulk market how is that trending or is that.

Is that moving share around a little bit as well thanks.

Speaker 3: I don't, from a bulk market, really, don't think there's much there to, I guess, to focus on for moving cheer around. It's tough to know, obviously, exactly where other people are. Being only a second to release, again, it's tough to know where we're going to market cheer. I think we fall back on.

From a bulk market really don't think there is much there to I guess to focus on for moving share Island, it's tough to know obviously exactly where other people are being only the second release again, it's tough to know where we fall in our market share I think we fall back on we felt really good about the capital we were able to deploy this quarter.

Speaker 3: We felt really good about the capital. We were able to deploy this quarter, felt the market was good. I think we feel like we have a pretty good read on.

<unk> felt the market was good I think we feel like we have a pretty good read on.

Speaker 3: on what the market is and sort of pricing in the market, and also think that we're delivering sort of the customer service to our customers that they want, and that's translating into a lot of good, high-quality business that we're running. So we'll wait and see what other people report, but we feel good about what we were able to accomplish in the fourth quarter.

What the market is in sort of pricing in the market and also think that we are delivering sort of the customer service to our customers that they wanted that translating into a lot of good high quality business that we're writing so we'll wait and see what other people report but.

We feel good about what we were able to accomplish in the fourth quarter.

Okay, great. Thanks.

Thank you next question comes from the line of Paul Me here.

Speaker 1: Thank you. Next question comes from the line of me here Pasha of Bank of America. Your line is open.

Sure.

Your line is open.

Speaker 9: Hi, good morning, and thank you for taking my questions. Just maybe to start, I did want to ask about just loan performance of the forbearance loans in particular. Are they performing in line with regular performing mortgages, or is it more in line with re-performing mortgages as they cure?

Hi, Good morning, and thank you for taking my questions just wanted maybe to start.

Want to ask about just loan performance also saw barrons loans in particular.

Dominion line with regular performing mortgages or is it more in line with re performing mortgages as the kiln.

Speaker 8: This is Mike. If I'm spelling it out right, I mean, because both when they're re-performing, they're re-performing, so they kind of are the same when you're a current, but these loans that are coming out of forbearance...

This is Mike.

Following all right I mean, because both when the re performing re performing so they've got higher the same when youre occurring but these loans that are coming out of forbearance.

Speaker 5: We don't get complete reporting, but on the reporting we get, the majority of them are coming out that are considered current, have used the deferral program, and they're continuing to meet their monthly obligations and staying current. So performing just like any other borrower that is current on their obligation.

We don't get complete reporting but.

But on the reporting we get the majority of them are coming out.

That are considered current have used the deferral program.

They are continuing to meet their monthly obligations and staying current performing.

Just like any other.

Borrower.

That is current on their obligations.

Speaker 9: Okay, maybe I'm not asking clearly. I guess what I was trying to understand is like, you know, it seems like previously delinquent mortgages have a higher tendency to be delinquent again.

Okay.

Yes, maybe im not asking it clearly I guess, what I was trying to understand.

It seems like previously delinquent mortgages have a higher tendency to be delinquent again.

Speaker 8: Oh, I see. Yeah. Yeah. So that's the thing. So re-defaulting. Yeah. No, I mean, I think too early, you know, in the cycle there, but...

Yes.

Thank you Kevin.

Redefault It yes, no I mean, I think too early in the cycle there but.

Speaker 8: I think just like with the HAMP modifications, the borrower's payments did not go up, mortgages weren't capitalized, and like on the HAMP modifications, the vast majority of those continue to perform. They don't re-default. I think we'd expect similar, if not better, performance out of these because they just extended out the mortgage payments. But too early to tell.

I think just like what the HAMP modifications right. The borrower's payment did not go up mortgages werent capitalized and like on the HAMP modifications. The vast majority of those continue to perform they don't read a fall.

I think we would expect similar if not better performance out of these because they just extended out.

Mortgage payments.

But too early to tell anything definitive on it.

Speaker 9: And then just one other question, in terms of your delinquent inventory, you know, just given the home price appreciation, did you give a statistic on how much or can you give a statistic on how much of the inventory has, I don't know, like LTV below 90%? As you estimated, I understand it's probably at like an MSA level versus an individual level, but just trying to understand how much home price appreciation has your delinquent

Understood and then.

Just one other question in terms of go delinquent.

Inventory just given the home price appreciation can you give us statistical into how much.

Can you give us statistical and how much of the inventory has I don't know like LTV below 90% as you estimated I understand it's probably at like an MSA level.

Individual level, but just trying to understand how much how much home price appreciation.

Tony.

Speaker 8: You know, they don't have it right up to our hands. We do certainly look at the adjusted, you know, the market, the market LTV, and maybe kind of referring back to a question earlier about the risk profile of so much being in the 21, you know, business. So you certainly look at it. I'd say the vast majority. I've seen price appreciation because you look at it at the MFA level. I don't have a precise figure for you to give, but you know.

They don't have it right that it has we do certainly look at the adjusted the Mark to market LTV.

And maybe kind of referring back to a question earlier about the risk profile, so much being in the 'twenty one bit.

Business. So you certainly look at it I would say the vast majority of seen price appreciation because you're looking at the MSA level I don't have a precise figure for you to give but.

I would say similar to what you're hearing across the marketplace in general.

Speaker 8: It's similar to what you're hearing across the marketplace in general, that the vast majority of loans, 18, 19, and 20, are the ones that are delinquent and there's been a lot of price appreciation.

That the vast majority of loans 18, 19 and 20 are.

The loans that are delinquent and theres been a lot of price appreciation.

Speaker 9: And my last question is just, are there any markets, anything you're looking at right now where it gives you pause? I mean, it feels like it's a very benign housing credit environment, very favorable backdrop. So I'm just curious, is there anything out there that you're looking at, which is maybe giving you pause or where you're thinking you might be pulling back a little bit?

Okay and my last question is just are there any markets anything you are looking at right now where it gives you pause I mean, it feels like it's a very benign housing credit environment very favorable backdrop. So I'm. Just curious is there anything out there that you are looking at which is maybe giving you pause or whether youre thinking you might be pulling back a little bit.

Speaker 3: meeting that you can comment on that. Thank you. Yeah, Tim, I mean, we're always looking for if there's any weaknesses and if it's certain markets, certain sectors. So it's something we, you know, we look at regularly. I think it's fair to say that we still feel really good about.

That you can comment on that thank you.

Yes, Tim.

Always looking for if there is any weaknesses in certain markets certain sectors.

So it's something we look at regularly I think it's fair to say that we still feel really good about.

Speaker 3: um, you know, housing and HPA and sort of the environment that we're originating into right now. Um, and that's I think that's pretty broad, right? Um,

Housing in HPA and sort of the environment that we're originating into right now.

And I think thats pretty broad right.

Speaker 3: I would say from any market specifically, I don't think anything that gives us a tremendous amount of pause. But again, I think as we talk about factors of HPA and where prices continue to go up and you think about affordability.

I would say from a from any market specifically I don't think anything that gives us tremendous amount of pause, but again I think as we talk about factors of HPA and where prices continue to go up when you think about affordability is something that we'll continue to watch it as we go through 2022, but I'd say through what we've written in 2021 and the first part of the other.

Speaker 3: It's something that we'll continue to watch as we move through 2022, but I'd say through what we've written in 2021 and the first part of, you know, the first month here in 22. It's just something we're monitoring, but nothing that I would say that we feel concerned about.

First month here in 'twenty two.

It's something we're monitoring but nothing that I would say that we feel are concerned about.

Okay.

Thank you.

Sure.

Speaker 1: Thank you. Next question comes from the line of Jeffrey Dunn of Dalding & Partners. Your line is open.

Thank you.

Next question comes from the line of Geoffrey Dunn with Dowling and partners. Your line is open.

Thanks, Good morning.

Speaker 10: Nathan, just to revisit the dividend discussion, you've historically been a quarterly consistent dividend payer out of MGIC. Obviously, the last two quarters have been lumpy specials. Are you going back to a regular quarterly dividend supplemented by specials, or is it more of a one-off special approach on an annual basis going forward?

Nathan just to revisit the dividend.

Discussion, you've historically been a quarterly consistent dividend payer out of MGIC. Obviously, the last two quarters have been lumpy specials are you going back to our regular quarterly dividend supplemented by specials or is it more of a.

One off special approach on an annual basis going forward.

Yes, Jeff.

Speaker 4: Jeff, no, thanks for the question. You know, we did have the quarterly dividend from MJSU, the holding company, pre-COVID. But if you recall, we also paid a $320 million kind of special dividend on top of that. You know, at the time, initially, the dividends were really trying to line up to the holding company's obligations. But given our liquidity position, that didn't make as much sense to us.

No. Thanks for the question, we did have the quarterly dividend from MGIC to the holding company pre COVID-19 , but if you recall, we also paid a $320 million kind of special dividend on top of that.

At the time initially the dividends were really trying to line up to the holding company's obligations, but given our liquidity position that didn't make as much sense to us.

Speaker 2: And so I think we're probably down the path of seeking special dividends on a kind of on a more ad hoc basis, but I wouldn't, I wouldn't say they're necessarily annual. I think they could be more frequent than annual. I just don't think they're going to happen quarterly like they did pre coven.

And so I think we're probably down the path of seeking special dividends on a kind of on a more AD hoc basis, but I wouldn't I wouldn't say they are necessarily annual I think there could be more frequent and annual I, just don't think they're going to happen quarterly like they did pre COVID-19 .

Okay.

And then.

Tim you mentioned that expenses are going to remain elevated with your tech investments and you call them kind of transformational can you talk a little bit of more about that what does that mean for magic what does it improve it your business what is it.

Speaker 10: Tim, you mentioned that expenses are gonna remain elevated with your tech investment, and you call them kind of transformational. Can you talk a little bit more about that? You know, what does that mean for Magic? What does it improve at your business? What does it?

Speaker 10: change going forward and what is the underlying run rate expense base and when might we return to that or do you just grow into it?

Change going forward.

And what is the underlying run rate expense base and when might we returned to that or do you just grow into it.

Speaker 3: Yeah, I'll talk a little bit about, I guess, the high level and let Nathan talk a little bit about the run rate. But, you know, I view it on a couple of dimensions. You know, one is, I think we've tried to invest smartly about how we approach the market. And Nathan sort of alluded to that in the opening remarks.

I'll talk a little bit about I guess, the high level of it Nathan talk a little bit about the run rate, but I.

I view it on a couple of dimensions.

One is I think we've tried to invest smartly about how we approach the market and Nathan sort of alluded to that in the opening remarks.

Speaker 3: You know the the environment in which we compete and how we need to understand market dynamics from a pricing standpoint are different than they were

The environment in which we compete and how we need to understand market dynamics from a pricing standpoint are different than they were three or four years ago and so we've tried to invest in that in that regard I think that we've done a really good job of of understanding sort of the market dynamics through some of that investment I think when you dive a little bit deeper from an analytical standpoint.

Speaker 3: three or four years ago. And so we've tried to invest in that regard and think that we've done a really good job of.

Speaker 3: of understanding sort of the market dynamics through some of that investment.

Speaker 3: I think when you dive a little bit deeper from an analytical standpoint, we strongly believe, too, that there's things that we can think about from a credit standpoint over time.

We strongly believe too that there are things that we can think about from a credit standpoint over time.

Speaker 3: in the underwriting process and pricing the risk appropriately. I think others have talked about that in the industry too, and so I think we're, you know, I think just scratching the surface on those types of things, and I don't think those things probably pay as quick a dividend necessarily, but it makes sure that we're staying on top of that. And then the other way is really how we think about our customer service, right, and how we interact with our customers, and making sure that we, our platforms from an operations standpoint allow us to integrate seamlessly with our customers.

The underwriting process and pricing the risk appropriately I think others have talked about that in the industry too and so I think we are.

I think just scratching the surface on those types of things and don't think those things probably pay as quick a dividend necessarily.

But it makes sure that we're staying on top of that and then the other way it's really how do we think about our customer service right and how we interact with our customers and making sure that we are platforms from an operation standpoint allow us to integrate seamlessly with our customers.

Speaker 3: who are, over time, really going to be looking to be more efficient themselves. And so, from our company standpoint, we always want to make sure that we can...

Quarter over time really going to be looking to be more efficient themselves and so from our company standpoint, we always want to make sure that we can meet our customers where they want to be met and we can meet and exceed their expectations as to how they interact with the company.

Speaker 3: to meet our customers where they want to be met and we can meet and exceed their expectations as to how they interact with the company.

Speaker 3: and think that there's more investment in the digitization of mortgage than probably ever has been.

Think that Theres more invested in the Digitization of mortgage and then probably ever has been and we want to make sure that we're on the forefront of that as opposed to lagging behind on that but I think that will pay dividends as well as.

Speaker 3: And we want to make sure that we're on the forefront of that, as opposed to lagging behind on that. And I think that'll pay dividends as well.

Speaker 3: as it has over time for MJIC of maintaining great customer service when we interact with our customers.

As it has over time for MGIC of maintaining great customer service, when we interact with our customers.

Speaker 2: And Jeff, just relative to run rate and where we are today versus the future, I think we do expect some level of elevated investment.

And Jeff just relative to kind of run rates and where we are today versus the future I think we do expect some level of elevated investment I gave.

Speaker 2: of guidance in the kind of $230 million range. I think if you think about 2023, we think that's another year of elevated investment for us. You know, exactly what that looks like will be largely dependent on our successes in 2022 and where the market is and where we need to be. But, you know, as we sit here today, I think we think that that level starts to come down a little bit, you know, beyond that point.

What kind of guidance and the kind of $230 million range. I think if you think about 2023, we think that's another year of elevated investment for us exactly what that looks like will be largely dependent on.

Our successes in 2022, and where the market is and where we need to be.

But as we sit here today I think we think that level starts to come down a little bit beyond that point.

Speaker 2: But we'll continue to kind of re-evaluate what we need to compete effectively in the market and make sure we're well positioned to do that.

But we'll continue to kind of reevaluate what we need to compete effectively in the market and make sure we're well positioned to do that.

Speaker 10: Okay. And then my last question is on ILN cost of capital. You know, if you do the upfront expense when a deal is launched, the credit you get, you know, it looks like it's low to mid-single digit after tax. But how do you think about the true cost of capital across the cycle when you look at, you know, your two oldest deals that are still outstanding, providing no premier's capital benefit?

Okay.

And then my last question is on <unk> cost of capital.

Do the upfront expense when it deals launched the.

Credit you get it looks like it's low to mid single digit after tax, but how do you think about the true cost of capital across the cycle. When you look at your two oldest deals that are still outstanding providing no P Myers capital benefit.

Speaker 2: Yes, Jeff, it's Nathan. I think it's a good question. And those first two deals were structured in a way with delinquency triggers that didn't react great during COVID, where we had a large increase in delinquencies, but also a large runoff of enforced policies.

Yes, Jeff It's Nathan I think it's a good question in those first two deals were structured in a way with delinquency triggers that.

Didn't react great during Covid, where we had a large increase in delinquencies, but also a large runoff of enforced policies, which has kept the delinquency rate, which is kind of the number of loans divided by the now remaining number of loans above those thresholds.

Speaker 2: which has kept the delinquency rate, which is kind of the number of loans divided by the now remaining number of loans above those thresholds.

Speaker 2: You know, the whole market has changed the structure of the deals to, you know, to not necessarily, you know, to contemplate that situation so that that doesn't happen again. And you see on our kind of most recent two deals, the one that's starting to pay down, you know, it's happening kind of consistent with the PMIRS benefit running off.

The whole market has changed the structure of the deals too.

Not necessarily.

To contemplate that situations, so that that doesn't happen again and you see on our on our most recent two deals or the one that's starting to pay down.

<unk>.

It is happening kind of consistent with the P Myers benefit running off but when we think about cost of capital for doing a deal. We're not just thinking about one scenario we're looking at.

Speaker 2: When we think about cost of capital for doing a deal, we're not just thinking about one scenario. We're looking at a wide range of scenarios, including somewhere the island deals take losses.

<unk> range of scenarios, including somewhere the island deals take losses.

Speaker 2: You know, scenarios where prepayments are fast or slow. And for us, you know, at inception, the expected cost is very attractive, which is, I think, why we'll continue to try to execute in that market as long as it's available.

Scenarios, where prepayments are fast or slow.

And for us at inception, the expected cost is very attractive which is I think why we will continue to try to execute in that market as long as it's available.

Okay, great. Thank you.

Thank you next question comes from the line of Ryan Gilbert of <unk>.

Speaker 1: Thank you. Next question comes from the line of Ryan Gilbert of BTIG. Your line is open.

<unk> Your line is open.

Yeah.

Speaker 11: Hi. Thanks. Good morning, everyone. First question on Purchase NIW, your growth looked particularly strong, better than I expected. And I'm wondering if you can add any details into what was driving the growth. Is that just how you think that, you know, is that just how volume looked in the fourth quarter? Or do you think that there were some differences in your competitive positioning relative to peers that drove that growth? Any details would help.

Hi, Thanks, good morning, everyone.

First question on <unk>.

Purchase niwa.

Year over year growth looked particularly strong better than I expected.

And I'm wondering if you can add any details.

What was driving the growth is that just how you think that is that just how volume look looked in the fourth quarter or do you think that there were some differences in your competitive positioning relative to peers that drove that growth.

Any details would help.

Speaker 3: What's Tim, I don't think there was anything specific that we that we did on that regard. Obviously, it's mostly driven by our customers and where they're where they're producing. So I don't think there's, I don't have any great insights as to, you know, why that performed better than than maybe what you would have expected. But it wasn't anything from a positioning standpoint on our end, you know,

Well, it's Tim I don't think there is anything specific that we that we did on that regard, obviously, it's mostly driven by our customers and where they're where they're producing.

So I don't think there is I don't have any great insights as to.

Why that performed better than maybe what you would've expected.

It wasn't anything from a positioning standpoint on our end.

Just trying to deploy capital and obviously a heavy purchase market.

Speaker 3: trying to deploy capital and obviously a heavy purchase market that we saw in the fourth quarter.

That we saw in the fourth quarter.

Okay got it thanks.

Speaker 11: Okay, got it. Thanks. And then second question, would just love to hear some details or color around the new business opportunities that you're evaluating. Is that within the core PMI business or are you looking at adjacent industries?

And then second question would just love to hear some details or color around the new business opportunities that you're evaluating is that within the core PMI business or are you looking at.

The adjacent industries.

Speaker 3: Yeah, I would say that there's nothing specific to talk about there. I think what we have said in the past and will continue to say is, you know, we want to make sure that we keep our eyes open to opportunities.

Yeah, It's Tim I would say that there is nothing nothing specific to talk about there I think we have said in the past and we will continue to say is we want to make sure that we keep our eyes open to opportunities.

Speaker 3: You know first we got a we got a service the market and our customers the way that we currently do But as we've had excess capital and think about sort of how we can deploy that We want to at least think about those types of opportunities And consider them and obviously here your different opportunities that could be out there and quite frankly. I'm telling me things It's really actionable and think that ultimately for our shareholders the best thing that that we could do then at that point is

First we got we got to service the market.

Our customers the way that we currently do but as we've had excess capital and think about sort of how we can deploy that we want to at least think about those type of opportunities.

Consider them and obviously here you are different opportunities that could be out there and quite frankly haven't found anything that's really actionable and think that ultimately for our shareholders. The best thing that we could do that at that point is.

Speaker 3: you know, purchase down, purchasing some of the debt, share repurchases, the dividends to the shareholders.

Purchased out efforts in some of the debt share repurchases dividends to the shareholders, but we always want to be cognizant of if theres other opportunities out there that could either enhance what we currently do are or be something else, but I would say that there is there is nothing specific that we think is actionable in the near term by any means.

Speaker 3: But we always want to be cognizant of if there's other opportunities out there that could either enhance what we currently do or be something else, but I would say that there's nothing specific that we think is actionable in the near term by any means.

Speaker 11: Okay, got it. Yeah. And the capital priorities as you laid them out make a lot of sense. Has there been any change in terms of quality of opportunities or pricing in the market that warranted a call out this quarter versus others?

Okay got it yes, and the capital priorities as you out as you laid them out and make a lot of sense is there is there has there been any change in terms of quality of opportunities or pricing in the market that warranted to call out this quarter versus others.

I don't think anything specifically no I mean, I think the market.

Speaker 3: I don't think anything specifically, no. I mean, I think, you know, the market obviously dictates a little bit what flows to you at certain times, depending upon maybe how other people react. But I think the fourth quarter in particular, I didn't...

Obviously dictates a little bit what flows to you had certain time, depending upon maybe how other people react, but I think the fourth quarter in particular I didn't I don't think we saw much of anything that seemed unusual or are that significant shift in maybe how competition was behaving so.

Speaker 3: I don't think we saw much of anything that seemed unusual or that significant shift in maybe how competition was behaving, so, you know, felt like it was, again, a very good quarter, felt comfortable with the capital we were able to deploy, the returns we were able to deploy it, and again, looking forward to 2022.

It felt like it was again a very good quarter felt comfortable with the capital we are able to play at the returns we're able to deploy it.

And again looking forward to 2022.

Okay. That's all I had thanks very much.

Okay.

Thank you there are no further question at this time I would like to turn the call over to our presenters for closing remarks.

Speaker 1: Thank you. There are no further questions at this time and I would like to turn the call over to our presenters for closing remarks.

Speaker 3: Okay, thanks Jay. I appreciate everyone's interest in MGIC and hope everyone has a great day.

Okay. Thanks, Jay I appreciate everyone's interest MGIC and hope everyone has a great day.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a great day.

Speaker 1: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.

Speaker 12: ??? ??? ???

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