Q1 2024 MGIC Investment Corporation Earnings Call
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Operator: Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation first quarter 2024 earnings call. At this time, all lines have been placed on mute to prevent any background noise.
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Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation first quarter 2024.
Operator: Earnings call at this time all lines have been placed on mute to prevent any background noise.
Operator: At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw a question, please press Star 11 again. Please be advised that today's conference is being recorded. I will now turn the conference over to Dianna Higgins, Head of Investment Relations. Please go ahead.
Dianna L. Higgins: The end of todays presentation, but we'll have a question and answer session.
Operator: To ask a question. During this session you will need to press star one on your telephone keypad, you wouldn't get an automatic might think advising our hand as rates do.
Speaker Change: Can we draw a question. Please press star one again.
Dianna L. Higgins: Please be advised that today's conference is being recorded.
Dianna L. Higgins: I will now turn the conference over today on the Higgins head of Investor Relations. Please go ahead.
Dianna L. Higgins: Thank you, Nadia. Good morning and welcome, everyone.
Dianna L. Higgins: Thank you Nadia good morning, and welcome everyone. Thank you for your interest in MGIC joining me on the call today to discuss our results for the first quarter, our Tim Mattke, Chief Executive Officer, and Nathan Colson, Chief Financial Officer, and Chief Risk Officer, Our press.
Dianna L. Higgins: Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the first quarter are Tim Mattke, Chief Executive Officer, and Nathan Colson, Chief Financial Officer and Chief Risk Officer. Our press release, which contains MGIC's first quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under the newsroom section. It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non-GAAP financial measures to their most comparable GAAP measures.
Dianna L. Higgins: Knees, which contains MGIC first quarter financial results was issued yesterday and is available on our website at M. G. G that MGIC dot com under newsroom includes additional information about our quarterly results that we will refer to during the call today.
Dianna L. Higgins: It also includes a reconciliation of non-GAAP financial measures to thermo comparable GAAP measure. In addition, we posted on our website our quarterly supplement that contains information pertaining to our primary risk in force and other information you may find valuable.
Dianna L. Higgins: In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk and force and other information you may find valuable. As a reminder, from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before we get started today, I want to remind everyone that during the course of this call, we may make comments about our expectations of the future.
Dianna L. Higgins: As a reminder from time to time, we May post information about our underwriting guidelines and other presentations or corrections to past presentations on our website.
Dianna L. Higgins: Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed on the call today is contained in our 8K and 10Q that were also filed yesterday. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent events. Moreover, no one 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 our 8K and 10Q. Now, with that, I have the pleasure to turn the call over to Tim. Thank you, Dianna.
Dianna L. Higgins: Before we get started today I want to remind everyone that during the course of this call. We may make comments about our expectations for the future actual results could differ materially from those contained in these forward looking statements additional results about the factors that could cause actual results to differ materially from those.
Tim: Just on the call today are contained in our 8-K and 10-Q that was also filed yesterday.
Dianna L. Higgins: If we make any forward looking statements we are not undertaking an obligation to update those statements in the future in light of subsequent events no. One should rely on the fact that such guidance or forward looking statements are current at any time other than the time of the call or the issuance of our 8-K and 10-Q.
Dianna L. Higgins: Now with that I have the pleasure to turn the call over to Tim.
Timothy James Mattke: Thank you, Dianna, and good morning, everyone. The company reported net income of $174 million in the first quarter, resulting in an annualized return on equity of 13.7%. These results are the continuation of another quarter of exceptional financial results and highlight the strength of our business model. Our focus on through-the-cycle performance is demonstrated in the way we acquire, manage, and distribute risk, which reflects a balanced approach to the market. Reinsurance programs that address both risk of loss and capital efficiency and capital allocation for the benefit of stakeholders. The execution of our business model is responsive to market conditions and has consistently generated attractive returns. During the quarter, we wrote $9 billion in new insurance.
Tim: Thank you Diana and good morning, everyone.
Timothy James Mattke: The company reported net income of $174 million in the first quarter, resulting in an annualized return on equity of 13, 7%.
Timothy James Mattke: These results are the continuation of another quarter of exceptional financial results highlight the strength of our business model.
Timothy James Mattke: Our focus on through the cycle performance as demonstrated in the way, we acquire manage and distribute risk reflects a balanced approach to the market reinsurance programs to address both the risk of loss of capital efficiency and capital allocation for the benefit of stakeholders.
Timothy James Mattke: Execution of our business model is responsive to market conditions and has consistently generated attractive returns.
Timothy James Mattke: During the quarter, we were at $9 billion do insurance.
Timothy James Mattke: And insurance, of course, the main driver of our revenue was $291 billion, down 0.5% from a year ago. There's been very little change recently in underwriting standards, and the new insurance we write continues to have strong credit characteristics. We are pleased with the overall credit quality and performance of our insurance portfolio. The mortgage origination industry continues to experience the headwinds of a smaller origination market as we transition away from record volumes of the recent past years, driven by elevated interest rates and affordability challenges. The supply of homes for sale is still limited due to the lock-in effect of homeowners with mortgages that have interest rates well below the current market rate.
Timothy James Mattke: In insurance the ports the main driver of our revenue was $291 billion.
Timothy James Mattke: <unk>, 5% from a year ago.
Timothy James Mattke: There's been very little change recently at underwriting standards and the new insurance. We write continues to have strong credit characteristics.
Timothy James Mattke: We are pleased with the overall credit quality performance of our insurance portfolio.
Timothy James Mattke: The mortgage origination industry continues to experience the headwinds of a smaller origination market as we transition away from record volumes of the recent past years, driven by elevated interest rates and affordability challenges.
Timothy James Mattke: Five homes for sale is still limited due to the lock in effect from homeowners with mortgages that have interest rates well below the current market rate.
Timothy James Mattke: While the current supply and demand dynamics create challenges for first-time homebuyers, it continues to support home prices. As I mentioned on prior calls, the headwinds to mortgage origination have largely been offset by the tailwinds that higher interest rates have on the persistency of our insurance in force. Annual persistency ended the first quarter at 86%, flat quarter over quarter. The net result of lower NAW and high persistency is that our insurance and force have remained relatively flat over the past several quarters, consistent with what we expected.
Timothy James Mattke: While the current supply demand dynamics create challenges for first time homebuyers and continues to support home prices.
Timothy James Mattke: As I mentioned on prior calls the headwinds to mortgage originations has largely been offset by the tailwind, but higher interest rates have on the persistency of our insurance in force.
Timothy James Mattke: Annual persistency end of the first quarter at 86% flat quarter over quarter.
Timothy James Mattke: The net result of <unk> W and high persistency that our insurance in force has remained relatively flat over the past several quarters consistent with what we expected. We continue to believe that the market is shaping up to look pretty similar to last year.
Timothy James Mattke: We continue to believe that the MI market is shaping up to look pretty similar to last year. Pence up demand and the strong desire of the millennial and Gen Z populations to own homes for reasons to be optimistic about MI opportunities in the long term.
Timothy James Mattke: Thanks up demand and the strong desire of the millennial and Gen Z population selling homes or reasons to be optimistic about M&A opportunities in the long term.
Timothy James Mattke: Shifting to our capital activities, in the quarter, we purchased 4.7 million shares of common stock for $93 million and paid a quarterly common stock dividend for a total of $32 million, representing a 72% payout ratio of this quarter's net income. In addition, in April, we purchased an additional 2.7 million shares of common stock for a total of $55 million. Last week, we announced the board authorized an additional $750 million share repurchase program, and in our earnings release, we announced that earlier this week, MGIC paid a $350 million dividend to the holding company.
Timothy James Mattke: Shifting to our capital activities in the quarter, we repurchased four 7 million shares of common stock for $93 million and paid a quarterly common stock dividend for a total of $32 million, representing a 72% payout ratio of this quarter's net income.
Timothy James Mattke: In addition in April we repurchased an additional $2 7 million shares of common stock for a total of $55 million.
Timothy James Mattke: Last week, we announced the board authorized an additional $750 million share repurchase program and in our earnings release, we announced that earlier this week MGIC paid of $350 million dividend to the holding company.
Timothy James Mattke: Both of these announcements were supported by Capital Levels, which are above our targets for both MGIC and the holding company. Our approach to capital management has been and will continue to be dynamic so that we can maintain financial strength and remain well positioned to achieve our objectives in varying macroeconomic environments. MGIC's capital structure includes $6 billion of balance sheet capital in our well-established reinsurers program, which remains integral to our risk and capital management strategies.
Timothy James Mattke: Both of these announcements were supported by capital levels, which are above our targets about MGIC and the holding company.
Timothy James Mattke: Our approach to capital management has been and will continue to be dynamic. So that we can maintain financial strength and remain well positioned to achieve our objectives and very unique macroeconomic environments.
Timothy James Mattke: <unk> capital structure includes $6 billion of Catholic balance sheet capital and our well established reinsurance program, which remains integral to our risk and capital management strategies.
Timothy James Mattke: In addition to reducing the volatility of losses and stress scenarios, our reinsurance agreements provide diversification and flexibility to our sources of capital at attractive costs and reduce our PMIRs required assets by $2.2 billion at the end of the first quarter. We continually monitor the level of capital of both MGIC and the holding company, considering the level of capital to retain versus return to shareholders. As part of this, we assess current and expected future operating environments, and we continually evaluate the best options to deploy capital to maximize long-term shareholder value.
Timothy James Mattke: In addition to reducing the volatility of losses in stress scenarios, our reinsurance agreements provide diversification and flexibility to our sources of capital at attractive costs and reduced our P. Myers required assets by $2 2 billion at the end of the first quarter.
Timothy James Mattke: We continually monitor the level of capital both MGIC and the holding company considering the level of capital to retain versus return to shareholders as.
Timothy James Mattke: As part of this we assess current and expected future operating environments, and we continually evaluate the best options to deploy capital to maximize long term shareholder value.
Timothy James Mattke: With the strong credit performance, financial results, and capital generation we are experiencing, combined with a smaller origination market, which is challenging the growth of our insurance in force and the related required capital, we continue to expect share repurchase will remain our primary means of returning capital to shareholders. With that, I will turn it over to Nathan to get into more details on our financial results.
Timothy James Mattke: With the strong credit performance financial results and capital generation, we're experiencing combined with a smaller origination market, which is challenging the growth of our insurance in force and the related required capital. We continue to expect share repurchases will remain our primary means of returning capital to shareholders.
Timothy James Mattke: With that let me turn it over to Nathan They give you more details on our financial results.
Nathan: Thanks, Tim and good morning.
Nathaniel Howe Colson: As Tim mentioned, we began the year with a solid quarter of financial results. We earned a net income of $0.64 per diluted share compared to $0.53 per diluted share last year. Adjusted net operating income was $0.65 per diluted share compared to $0.54 last year. A detailed reconciliation of GAAP net income to adjusted net operating income can be found in our earnings release.
Nathan: As Tim mentioned, we began the year with a solid quarter of financial results.
Nathaniel Howe Colson: We earned net income of 64 cents per diluted share compared to <unk> 53 per diluted share last year.
Nathaniel Howe Colson: Adjusted net operating income was <unk> 65 per diluted share compared to 54 cents last year.
Nathaniel Howe Colson: A detailed reconciliation of GAAP net income to adjusted net operating income can be found in our earnings release.
Nathaniel Howe Colson: The results for the first quarter were reflective of the continued strong credit performance we have been experiencing, which again led to favorable loss reserve development and resulted in a 2% loss ratio this quarter. Our re-estimation of ultimate losses on prior delinquencies resulted in $49 million of favorable loss reserve development during the quarter. The favorable development this quarter primarily came from delinquency notices received in 2022 and the first quarter of 2023. As collections on those delinquency notices continue to exceed our expectations, we have made favorable adjustments to our ultimate loss expectations.
Nathaniel Howe Colson: The results for the first quarter were reflective of continued strong credit performance, we have been experiencing which again led to favorable loss reserve development and resulted in a 2% loss ratio this quarter.
Nathaniel Howe Colson: Our re estimation of ultimate losses on prior delinquencies resulted in $49 million of favorable loss reserve development in the quarter.
Nathaniel Howe Colson: The favorable development. This quarter, primarily came from delinquency notices received in 2022 and the first quarter of 2023.
Nathaniel Howe Colson: I was curious on those delinquency notices continued to exceed our expectations, we have made favorable adjustments to our ultimate loss expectations.
Nathaniel Howe Colson: As a reminder, the delinquencies notices we receive during a quarter will include loans from many different book year vintages. We continue to maintain our initial ultimate loss assumptions related to new delinquencies from the most recent quarters. In the quarter, our delinquency inventory decreased by 6% to approximately 24,100 loans, with Cures Outpacing New Notice. For some context on the current delinquency inventory level, it is 22% lower than the pre-pandemic level from the first quarter of 2019.
Nathaniel Howe Colson: As a reminder, the delinquency notices we received during the quarter will include loans for many different bulkier vintages.
Nathaniel Howe Colson: We continue to maintain our initial ultimate loss assumptions related to new delinquencies from the most recent quarters.
Nathaniel Howe Colson: In the quarter, our delinquency inventory decreased by 6% to approximately 24100 loans.
Nathaniel Howe Colson: With tears outpacing new notices.
Nathaniel Howe Colson: For some context on the current delinquency inventory level. It is 22% lower than the pre pandemic level from the first quarter of 2019.
Nathaniel Howe Colson: We continue to expect that the level of new delinquency notices may increase due to the seasoning of the large 2020 and 2021 book years being in what are historically higher loss emergence years and seasonality. Regarding seasonality, historically, February, March, and April were seasonalally the best months for mortgage credit performance. The pandemic and subsequent governmental response significantly disrupted mortgage credit seasonality, but it appears it may be returning.
Nathaniel Howe Colson: We continue to expect that the level of new delinquency notices may increase due to the seasoning.
Nathaniel Howe Colson: The large 2020 in 2021 book years being in what are historically higher loss emergence gears and seasonality.
Nathaniel Howe Colson: Regarding seasonality historically February March and April are seasonally the best months for mortgage credit performance.
Nathaniel Howe Colson: The pandemic and subsequent governmental response significantly disrupted mortgage credit seasonality, but it appears it may be returning.
Nathaniel Howe Colson: And we do not expect a decline in the delinquency inventory we had in the first quarter, which we'll repeat in subsequent quarters this year. The Enforce Premium Yields 38.5 basis points in the quarter, flat quarter over quarter. As I mentioned on the last call, given our expectations for another year with high persistency and a smaller MI market, we expect the enforced premium yield to remain relatively flat for the year. Book value per share at the end of the first quarter was $18.97, up 14% compared to a year ago.
Nathaniel Howe Colson: We do not expect a decline in the delinquency inventory we had in the first quarter will repeat in subsequent quarters. This year.
Nathaniel Howe Colson: The in force premium yield was $38 five basis points in the quarter flat quarter over quarter.
Nathaniel Howe Colson: As I mentioned on the last call given our expectations for another year with high persistency and a smaller in MA market. We expect the enforced premium yields remained relatively flat for the year.
Nathaniel Howe Colson: Book value per share at the end of the first quarter was $18 97.
Nathaniel Howe Colson: Up 14% compared to a year ago.
Nathaniel Howe Colson: The increase in book value per share was due to our strong results in accretive share repurchases, offset somewhat by our quarterly shareholder dividends. However, higher interest rates continue to be a headwind for book value per share. Higher interest rates have been positive for the earnings potential of the investment portfolio, and that continues to come through in our results. The book yield on the investment portfolio ended the quarter at 3.8%, up 10 basis points in the first quarter and up 70 basis points from a year ago.
Nathaniel Howe Colson: The increase in book value per share was due to our strong results and accretive share repurchases offset somewhat by our quarterly shareholder dividends.
Nathaniel Howe Colson: While higher interest rates continued to be a headwind for book value per share higher interest rates have been a positive for the earnings potential of the investment portfolio and that continues to come through in our results.
Nathaniel Howe Colson: The book yield on the investment portfolio ended the quarter at three 8%.
Nathaniel Howe Colson: Up 10 basis points in the first quarter and up 70 basis points from a year ago.
Nathaniel Howe Colson: Net investment income was $60 million in the quarter, up $2 million sequentially and up $11 million from the first quarter of last year. During the first quarter, our reinvestment rates were above the book yield, and assuming a similar interest rate environment, we expect the book yield to continue to increase, but at a slower rate, as the increase in book yield continues to narrow the difference between our current book yield and reinvestment rates. We remain disciplined in our approach to expense management and focus on efficiency. Operating expenses in the quarter were $61 million, down from $73 million in the first quarter of last year.
Nathaniel Howe Colson: Net investment income was $60 million in the quarter.
Nathaniel Howe Colson: $2 million sequentially and up $11 million from the first quarter last year.
Nathaniel Howe Colson: Okay.
Nathaniel Howe Colson: During the first quarter, our reinvestment rates were above the book yield and assuming a similar interest rate environment. We expect the book yield to continue to increase but at a slower rate as the increase in book yield continues to narrow the difference between our current book yield and reinvestment rates.
Nathaniel Howe Colson: We remain disciplined in our approach to expense management and focus on efficiency.
Nathaniel Howe Colson: Operating expenses in the quarter were $61 million down from $73 million in the first quarter last year.
Timothy James Mattke: We continue to expect the full-year operating expenses will be in the range we provided in February of $215 million to $225 million. Lastly, as we mentioned on the last call, in January, S&P upgraded MGIC's financial strength and credit ratings to A- and upgraded the credit rating of the holding company to BBB-, and the holding company is now fully investment grade. The outlook for the S&P rating is stable. In March, Moody's affirmed MGIC's A3 rating and changed the outlook to positive from stable. The rating outlook for MGIC's rating from AMBEST was changed to Positive from Stable last September. With that, let me turn it back over to Tim.
Nathaniel Howe Colson: We continue to expect our full year operating expenses will be in the range. We provided in February of $215 million to $225 million.
Timothy James Mattke: Okay.
Timothy James Mattke: Okay.
Timothy James Mattke: Lastly, as we mentioned on the last call in January S&P upgraded Mgic's financial strength and credit ratings to a minus.
Timothy James Mattke: And upgraded the credit rating of the holding company to Triple B minus.
Timothy James Mattke: The holding company is now fully investment grade.
Timothy James Mattke: The outlook for the S&P rating is stable.
Tim: In March Moodys affirmed MGIC to a three rating and changed the outlook to positive from stable.
Timothy James Mattke: The rating outlook for MGIC ratings from Am best was changed.
Timothy James Mattke: To positive from stable last September.
Tim: With that let me turn it back over to Tom Thanks.
Timothy James Mattke: Thanks, Nathan. A few last comments.
Tim: Thanks, Nathan Pls comments, we're proud of the critical role we play in supporting the housing market and we take pride in knowing that what we do everyday matters.
Timothy James Mattke: Impact on families and communities.
Timothy James Mattke: We are proud of the critical role we play in supporting the housing market, and we take pride in knowing that what we do every day matters. It has an impact on families and communities. We started the year with a solid quarter. While there are still some uncertainties in the economic landscape, the housing market remains resilient, and the outlook for it is generally positive. We have an unwavering commitment to delivering value to our shareholders, customers, and stakeholders.
Timothy James Mattke: We started the year with a solid quarter, but theres still some uncertainties in the economic landscape. The housing market remains resilient and the outlook for this generally positive we have an unwavering commitment to delivering value to our shareholders customers and stakeholders.
Timothy James Mattke: Our ability to continuously adapt and evolve has been instrumental in our long-term success. As we navigate the road ahead, we remain confident in our position and leadership in the market, as well as our ability to execute our business strategies. With that, operator, let's take questions. Thank you so much.
Timothy James Mattke: <unk> to continuously adapt and evolve this debt instrument on our long term success.
Timothy James Mattke: As we navigate through out ahead and remain confident in our position and our leadership in the market as well as our ability to execute our business strategies.
Timothy James Mattke: With that operator, let's take questions.
Operator: Thank you so much. Dear participants, as a reminder, if you wish to ask a question over the phone, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 11 again. Please stand by while we compile the Q&A roll study. This will take a few moments. Now we're going to take our first question, and it comes from the line of Bose George from KBW. Your line is open. Please ask your question.
Speaker Change: Thank you so much dear participants as a reminder, if you wish to ask a question over the phone. Please press star one on your telephone keypad and wait for your name to be announced to withdraw. Your question. Please press star. One again, please standby will compile the key narrow studies will take a few moments.
Operator: And now we'll go and take our first question and it comes from the line of Bose George from <unk>. Your line is open. Please ask your question.
Bose Thomas George: Hey guys, good morning. I first wanted to ask about the NIW growth this quarter. It looked a little slower than what we saw from peers. Is there anything that caused you to sort of slow down a bit, or is it just a blip in a seasonally slow quarter?
Bose Thomas George: Hey, guys good morning.
Bose Thomas George: First wanted to ask about the <unk> growth this quarter it looked a little slower than what we saw from peers is there anything that caused you to sort of slow down a bit or is it just that blip in a seasonally slow quarter.
Timothy James Mattke: So, Bose, I appreciate the question. I mean, I think it's safe to say we probably lost a little bit of share this quarter. That's not a surprise to us. I mean, the NIW and Q1 are really reflective of the pricing environment, sort of November, December, January. And I think it's safe to say that we lost a little bit of share. But from our perspective, a good return, we want to remain disciplined on price. We haven't lost any access to customers, that type of thing. And so for us, you know, we look at it over the long run and aren't overly concerned about that dip from a Q1 perspective.
Speaker Change: So Paul I appreciate the question.
Speaker Change: Thank you.
Timothy James Mattke: I think it's safe to say, we probably lost a little bit of share this quarter, that's not a surprise to us.
Timothy James Mattke: The <unk> in Q1 is really reflective of the pricing environment sort of November December January and and I think it's safe to say it will be lost lots of little bit of share.
Timothy James Mattke: But from our perspective, good return, Ron and remain disciplined on price.
Timothy James Mattke: Haven't lost any access to customers that type of thing and sell for us.
Timothy James Mattke: We look at it over the long run and arent overly concerned about that dip from a from a coupon perspective.
Bose Thomas George: Okay, great, thanks. And then in terms of capital return, you know, you noted insurance and force to be flattish this year, I guess, leverage low. Should we assume, you know, essentially all your earnings this year could go towards capital return?
Speaker Change: Okay, great. Thanks, and then in terms of capital return you noted insurance in force to be flattish. This year I guess leverage low should we assume essentially all your earnings this year could go towards capital return.
Timothy James Mattke: I think, you know, Bose and Nathan can add on if he wants to, but I think, ultimately, you know, we've demonstrated over the last couple of years a willingness to return capital when we have seen that we have access at MGIC and ultimately at the holding company, both through increasing the dividends to shareholders as well as the share repurchase. And as we've talked about in the last couple of quarters, with less of that cash at the holding company needed to service that or repurchase that, it's allowed us to have more share repurchase activity. So I think, you know, the last couple of quarters are pretty representative of the sort of flexibility we have there and sort of the willingness to repurchase when we think it's good value.
Speaker Change: I think Bose and Nathan can add in if he wants to but I think ultimately.
Timothy James Mattke: We've demonstrated the last couple of years.
Timothy James Mattke: A willingness to return capital when we have viewed that we have access that MGIC and ultimately at the holding company.
Timothy James Mattke: Both through increasing the dividend to shareholders as well as as well as share repurchase and as we've talked the last couple of quarters.
Timothy James Mattke: With fewer that cash at the holding company needed to service debt or repurchase debt. It's allowed us to have more to share repurchase activity.
Timothy James Mattke: Thank you to all of the last couple of quarters are pretty representative.
Timothy James Mattke: What sort of flexibility, we have there and sort of the willingness to repurchase when we think it's a good value.
Operator: Okay, great. Thanks.
Speaker Change: Okay, great. Thanks.
Operator: Now we're going to take our next question, and the next question comes from the line of Doug Harter from UBS. Your line is open, please ask your question. Just a moment, please. DST, because I will just proceed with the next question. And the next question comes from the line of Terry Ma from Barclays. Your line is open; please ask your question.
Operator: Sure.
Speaker Change: And I will go and take our next question.
Operator: And the next question comes from the line of Doug Harter from UBS. Your line is open. Please ask your question.
Speaker Change: Just a moment please.
Terry Ma: Please speak I thought we'd just proceed with the next question.
Terry Ma: And the next question comes from the line of Terry MA from Barclays. Your line is open. Please ask your question.
Terry Ma: Hi, thanks. Good morning.
Terry Ma: Hi, Thanks, good morning.
Terry Ma: Wondering if you can provide a little more color on the cure activity in the quarter. Thank you mentioned it could be a return to seasonality. So maybe just speak to I guess.
Terry Ma: What's driving that return now and then there is also a subset and meaningful increase in the cures from the three payments or less bucket is that purely attributed attributable to seasonality or is there something else in there.
Nathaniel Howe Colson: I'm just wondering if you can provide a little more color on the cure activity in the quarter. I think you mentioned it could be a return of seasonality. So, maybe just speak to, I guess, what's driving that return now. And then there is also a meaningful increase in the cures from the 3 payments or less bucket. Is that purely attributable to seasonality, or is there something else in there?
Terry Ma: Okay.
Terry Ma: Nathan Thanks for the question.
Nathaniel Howe Colson: I think the.
Nathaniel Howe Colson: Terry, it's Nathan. Thanks for the question. Yeah, I think seasonality exists in credit performance. And by that, I really mean kind of new notices and cure activity and the ratio between those two. You know, the months that I called out, February, March, and April, were historically months where cures would outpace new notices, even in a relatively flat, you know, overall delinquency environment, you know, because of the timing of the pandemic.
Nathaniel Howe Colson: Seasonality had existed in credit performance and by that I really mean kind of new notices and cure activity in the ratio between those two.
Nathaniel Howe Colson: The months that I called out February March April where historically months for cures would outpace new notices even in a relatively flat overall delinquency environment.
Nathaniel Howe Colson: Because of the timing of the pandemic and then the subsequent government responses and then the timing of when forbearance plans and it really for 2020, 'twenty, one and into 'twenty. Two there really wasn't a lot of seasonality as these other factors kind of dwarfs any seasonal impact that may have happened.
Nathaniel Howe Colson: And then the subsequent government response, and then the timing of when forbearance plans ended, really, for 2020, 21, and into 22, there really wasn't a lot of seasonality as these other factors kind of dwarfed any seasonal impact that may have happened. But I think starting in 2023, we saw this in retrospect a little bit more. I think we feel like we're seeing it again.
Nathaniel Howe Colson: But I think starting in 2023, we saw this in retrospect, a little bit more I think we feel like we're seeing it again.
Terry Ma: And we certainly observed the same thing about the early cure activity out of loans that were in the three month or less bucket. And we also disclosed the cures that happened intra-quarter. So those are loans that are both new notices and cures within the same quarter. You know, that rate was elevated this quarter. Again, I think we should attribute that more to seasonality than to, you know, maybe a resurgence of the delinquency rate coming down a lot from this level.
Nathaniel Howe Colson: We certainly observed the same thing about the early cure activity out of.
Terry Ma: Out of loans that were three months or less bucket and we also disclosed the.
Terry Ma: It appears that happened intra quarter. So those are the ones that are both new notices and carriers within the same quarter.
Terry Ma: That rate was elevated this quarter, but again I think we attribute that more to.
Terry Ma: We have more of a seasonality then to maybe like a resurgence of the delinquency rate coming down a lot from this level.
Nathaniel Howe Colson: Got it. That's helpful. And on the reserve release in a quarter you mentioned, they're mainly from 2022 and first quarter 23 notices. Any more color you can provide on, I guess kind of like, what vintage of origin they came from?
Speaker Change: Got it that's helpful and on the reserve release in the quarter you mentioned there.
Nathaniel Howe Colson: Mainly from 2022 in first quarter 'twenty three.
Nathaniel Howe Colson: Notices.
Nathaniel Howe Colson: More color you can provide on I guess kind of like what vintage of origination that came from.
Nathaniel Howe Colson: You know, the delinquencies in those, you know, for those years, the delinquencies that we would have received in 2022, you know, we've had 30 to 40% of our delinquencies for some time come from our 08 and prior book. We also disclosed some, some statistics about that, but I think interestingly, you know, this quarter, about 98% of those loans were previously delinquent. So we have a lot of loans that I think are kind of coming in and out of the delinquency inventory in that bucket.
Nathaniel Howe Colson: Yes.
Nathaniel Howe Colson: The delinquencies in those.
Nathaniel Howe Colson: For those yet so the delinquencies that we would have received in 2022.
Nathaniel Howe Colson: We've had 30% to 40% of our delinquencies for some time have come from our OE and prior book.
Nathaniel Howe Colson: We also disclosed some statistics about that but I think interestingly.
Nathaniel Howe Colson: This quarter about 98% of those loans that have been previously delinquent. So we have a lot of loans that I think are kind of coming in and out of the delinquency inventory out of that bucket.
Nathaniel Howe Colson: But other than that, I don't, you know, I don't think there was a lot that was notable just across the section of our book otherwise. And as we think about Cure Activity and look at the details of where it's coming from, it doesn't appear to be concentrated in any major cohort. It seems like it's coming from across the LTV spectrum, across the FICO spectrum, across the DTI spectrum, across geography. So, I think it feels very broad-based for us and, you know, ultimately the initial loss expectations that we had, particularly on a claim rate basis of 7.5% for those notice quarters.
Nathaniel Howe Colson: But other than that I don't I don't think there was a lot that was notable just a cross section of our book otherwise and as we think about your activity and look at the details of where it's coming from it doesn't appear to be concentrated in any major cohort. It seems like it's coming from across the LTV spectrum across the FICO spec.
Nathaniel Howe Colson: Across the DTI spectrum across geographies, so it feels very broad based for us.
Nathaniel Howe Colson: Ultimately the initial loss expectations that we had particularly on claim rate basis of seven 5% for those notice quarters.
Nathaniel Howe Colson: The actual, you know, at this point, our estimates in many cases are less than half of that just based on actual Cure Activity. And some of those notice quarters are 96, 97, even 98% developed at this point. So, you know, we're kind of zeroing in on ultimate losses for some of those, and they're just going to be a lot lower than we expected.
Nathaniel Howe Colson: Actual at this point our estimates in many cases are less than half of that just based on actual cure activity in some of those.
Nathaniel Howe Colson: Notice quarters are 90, 697%, 98% developed at this point, so we're kind of zeroing in on the ultimate losses for some of those and they are just going to be a lot lower than we expected.
Terry Ma: Got it. That's helpful. Thank you. Thank you.
Speaker Change: Got it that's helpful. Thank you.
Terry Ma: <unk>.
Operator: Now we're going to take our next question. Just give us a moment. And the next question comes from the line of Soham Bonsal from BTIG. Your line is open. Please ask your question.
Speaker Change: Thank you.
Speaker Change: Now we're going to take our next question.
Soham Jairaj Bhonsle: Just give us amendments.
Soham Jairaj Bhonsle: And the next question comes from the line of Cellcom Bansal from BT <unk>. Your line is open. Please ask your question.
Soham Jairaj Bhonsle: Hey guys, good morning. I hope you're doing well.
Soham Jairaj Bhonsle: Hey, guys. Good morning, hope Youre doing well.
Soham Jairaj Bhonsle: Tim I guess first one on the decision to introduce the $750 million buyback I was just wondering if you could provide some color into how you and the board sort of arrived at that particular figure right I'm, particularly curious on sort of that any of the <unk>.
Soham Jairaj Bhonsle: <unk> is around the macro or the book of business that you may be all considered as you built out your plan to what looks like the end of 2026 here.
Soham Jairaj Bhonsle: Tim, I guess the first one on the decision to introduce the $750 million buyback. I was just wondering if you could provide some color into how you and the board sort of arrived at that particular figure, right? I'm particularly curious about sort of the, you know, any assumptions around the macro or the book of business that you maybe all considered as you built out your plan to what looks like the end of 2026.
Soham Jairaj Bhonsle: Yes, I appreciate the question let me.
Soham Jairaj Bhonsle: Take a number of things into account I think the previous one three to authorize for about 500 million over a similar time period.
Timothy James Mattke: Yeah, I appreciate the question. You know, I take a number of things into account. I think the previous ones we'd authorized were about $500 million over a similar time period. Obviously, I think we have a little bit more capacity now, but ultimately, it wanted to be something that, you know, we believe we will be able to execute over that period of time under a range of different scenarios. And that's been one of the sort of principles we've had when we declared our sort of, you know, sort of repurchase program is that it shouldn't just be able to work in the current environment.
Soham Jairaj Bhonsle: Obviously, I think we have a little bit more capacity now, but ultimately wanted to be something that.
Timothy James Mattke: We believe we will be able to execute over that period of time under a range of different scenarios.
Timothy James Mattke: I wanted to sort of principles, we've had when we've declared sort of.
Timothy James Mattke: Sort of repurchase program is that it shouldnt just be able to work in the current environment. It should be able to work in a range of scenarios and even as we went through the pandemic. As an example, we were able to execute on our on our repurchase plan and so we looked at it looked at it from obviously the size of what our market cap is but more importantly, when we think about capital generation.
Timothy James Mattke: It should be able to work in a range of scenarios. And even, you know, as we went through the pandemic, as an example, we were able to execute on our repurchase plan. And so we looked at it from the obvious size of what our market cap is, but more importantly, when we think about capital generation expectations under very varying scenarios over the next few years, feeling confident that we should be able to execute against that and use the full authorization.
Timothy James Mattke: Expectations under very bearish scenarios over the next few years.
Timothy James Mattke: Feeling confident that we should be able to execute against that and use the velocity rosacea.
Soham Jairaj Bhonsle: And then I'm looking at slide six, maybe I'm not reading this correctly, but if I look at, you know, the percentage of development related to the other sort of line, how you break it out, it seems like a lot of the improvement did not come from claims this quarter, it was claimed rate, sorry, and it was something like severity or things like that. Am I reading that wrong? Like, what should we read into that?
Speaker Change: Okay great.
Soham Jairaj Bhonsle: And then I'm looking at slide six maybe I am not reading this correctly, but if I look at so the percentage of development related to the other.
Soham Jairaj Bhonsle: Nine how you break it out it seems like a lot of improvement did not come from clean this quarter claim rate, sorry, and with other something like the severity or things like that am I reading that wrong like what should we read into that.
Nathaniel Howe Colson: Yes, it's Nathan. I'll take that. I mean, I think, you know, the severity in Q4 was a little bit less, just because we had, I think, a little bit more claim rate improvement. So that drove the ratio between those two a little bit. But the 16%, I think, is reflective of another quarter where our actual severity on claims was, I think, in the low 60s, versus our reserving assumptions, which are typically, you know, above 100%.
Soham Jairaj Bhonsle: Okay.
Soham Jairaj Bhonsle: Yes, it's Nathan I'll take that I mean I think.
Nathaniel Howe Colson: The severity in Q4, it was a little bit less just because we had I think a little bit more claim rate improvement so that drove the ratio between those two a little bit.
Nathaniel Howe Colson: But the 16% I think is reflective of another quarter, where our.
Nathaniel Howe Colson: Actual severity on claims was I think in the low sixty's versus our reserving assumptions are typically above a 100%.
Nathaniel Howe Colson: So a lot of that is, as we have not only realized actual claims that are at lower severities than what we would have expected, but also, as loans are maturing, those severities are also, I think, are also being adjusted. So, the go forward on that, I think it's probably not going to look like what we showed here in the first quarter of last year, where it's 100% and zero. You know, I think a split between both claim rate and severity in the current environment, if we have a continuation of this current environment, I think we'll see improvement in both claim rate and severity, just because actual severities right now are running so much lower than what we have in the reserve assumptions.
Nathaniel Howe Colson: So a lot of that is as we have.
Nathaniel Howe Colson: Not only realized actual claims that are at lower severity than what we would've expected, but also as long as they are hearing.
Nathaniel Howe Colson: Severities are also.
Soham Jairaj Bhonsle: Got it. And Nathaniel, just one more.
Nathaniel Howe Colson: No I think are also being adjusted so the.
Soham Jairaj Bhonsle: The go forward on that and I think it's probably not going to look like what we show here in the first quarter of last year, where it's 100% <unk> zero.
Soham Jairaj Bhonsle: I think a split between both claim rate and severity in the current environment. If we have a continuation of this current environment I think we will see improvement both claim rate and severity just because the actual severities right now running so much lower than then what we have.
Soham Jairaj Bhonsle: The reserve assumptions.
Nathaniel Howe Colson: On the net investment income line, it looks like you've been growing that line by about $2 million every quarter. I mean, is that sort of a sustainable run rate here as the portfolio rolls off and you come into new money yields? How should we sort of think about that developing through the year?
Nathaniel: Got it and just one more on the net investment income line. It looks like you've been growing that line about $2 million every quarter.
Nathaniel Howe Colson: What a sustainable run rate here as the portfolio rolls off and Youre coming to new money yield how should we should think about that developing through the year.
Nathaniel Howe Colson: Yeah, I would I would
Nathaniel Howe Colson: Yeah, I would maybe call out two things. I mean, what we said was that we do think that the book yield will continue to increase, but probably at a slower pace. And we've already seen that a little bit. We had, you know, increases of approximately 20 basis points a quarter for some time. This quarter, it was like 10 basis points.
Speaker Change: Yes, I would.
Nathaniel Howe Colson: Maybe call out two things I mean, what we said was we do think that the book yield will continue to increase but <unk>.
Nathaniel Howe Colson: At a slower pace than we've already seen that a little bit we had.
Nathaniel Howe Colson: Increases of approximately 20 basis points a quarter for some time this quarter. It was like 10 basis points. So.
Nathaniel Howe Colson: It's still increasing but at a slower rate so that will slow the growth in <unk>.
Nathaniel Howe Colson: Net investment income all sequel, as well the other factor is the amount of balance sheet assets that we have invested.
Nathaniel Howe Colson: So, you know, still increasing, but at a slower rate. So that will, you know, slow the growth in net investment income, and all sequels as well. The other factor is the amount of, you know, kind of balance sheet assets that we have invested in over the last couple of years. As we have over the last couple of years, that has grown as well, as the yield has increased. Depending on what our kind of capital return levels are, we hold the balance sheet capital closer to flat, and that will also limit the growth of net investment income.
Nathaniel Howe Colson: As we over the last couple of years that has grown as well as well as the guild increasing.
Nathaniel Howe Colson: Depending on what our kind of capital return levels are we hold the balance sheet capital closer to flat that will also limit the growth of net investment income, but I think from a what we're thinking about managing to is what we're invested in.
Nathaniel Howe Colson: Really no changes there in terms of what the strategy is just reinvestment rates continue to be somewhere around 150 basis points higher than the current book yield so as that.
Nathaniel Howe Colson: But I think from a, you know, what we're thinking about managing to is, what we're invested in, really no changes there in terms of what the strategy is, just reinvestment rates continue to be, you know, somewhere around 150 basis points higher than the current book yield. So as that rolls over, and as new money comes in, you know, that will provide an opportunity for an incremental increase in the book yield.
Nathaniel Howe Colson: Rolls over and as new money comes in that will provide an opportunity for incremental increase in the book yield.
Speaker Change: Okay. Thanks, a lot guys.
Nathaniel Howe Colson: Thanks.
Operator: Now we're going to take our next question. And the question comes to the line of Mihir Bhatia from Bank of America. Your line is open, please ask your question. Hi, this is actually Nate on...
Speaker Change: Now, we'll go and take our next question.
Operator: And the question comes from the line of Mihir Bhatia from Bank of America. Your line is open. Please ask your question.
Nathaniel Howe Colson: Hi, this is actually Nate Richmond from Mihir, but I'm interested in my question. Can you talk a little bit about the embedded equity within the delinquent inventory? Any stats you can share there? And also, I know you said delinquencies tend to normalize over time, but where do you think that settles out on a steady state relative to pre-pandemic levels?
Nate: Hi, This is actually made on an average month from me here, but.
Nathaniel Howe Colson: Taking my question can you talk a little bit about the embedded equity.
Nathaniel Howe Colson: Delinquent inventory that you can share there and then also.
Nathaniel Howe Colson: I know you've gone through to kind of normalize over time.
Nathaniel Howe Colson: The weakness hurdles out like on a steady state relative to pre pandemic levels.
Nathaniel Howe Colson: I'll take the embedded equity, and I missed the last part of the question. So I may ask you to repeat that when you have to recover the embedded equity. But we've got this question a lot. And I mean, we certainly have.
Nathaniel Howe Colson: Let's face it all I'll take the embedded equity in.
Nathaniel Howe Colson: I missed the last part of the question. So I may ask you to repeat that.
Nathaniel Howe Colson: When you have to recover the embedded equity, but we've gotten this question a lot.
Nathaniel Howe Colson: It's something that we have statistics on, but I think for us, those are based on typically CBSA level average home prices. And the delinquent inventory, you know, is for us right now about 2%. You're not dealing with the average situation. In that case, you're dealing with the kind of tail of a distribution of home prices and economic situations. And that's, you know; we're not really holding capital. The business isn't really geared around the average.
Nathaniel Howe Colson: We certainly have.
Nathaniel Howe Colson: Things that we have the statistics on but I think for us.
Nathaniel Howe Colson: Based on typically CBS, a level average home prices and the delinquent inventory is for US right now about 2% you're not dealing with the average situation in that case, you're dealing with kind of the tail of the distribution of home prices and economic situations and that's we're not.
Nathaniel Howe Colson: It's really geared around these kind of tail scenarios. So, you know, for us, we could look at that, but I think I get less comfort from that from a resolution of delinquent loans, just because I think it's more likely for those loans that they haven't experienced the average home price appreciation.
Nathaniel Howe Colson: Really holding capital for business isn't really geared around the average it was really geared around these kind of tail scenarios.
Nathaniel Howe Colson: Got it. That's helpful.
Nathaniel Howe Colson: So for US we could look at that but I think it less maybe comfort in that.
Nathaniel Howe Colson: A.
Nathaniel Howe Colson: Dilution of delinquent loans, just because I think it's more likely for those loans that they have an experienced the average home price appreciation.
Nathaniel Howe Colson: And then my follow-up to that was just, like, where do you think delinquencies will normalize on like a steady state, like, relative to pre-pandemic levels? Like, I realize that you think they're going to go upwards, but like, how much higher do they go, like, until things normalize? And if I can ask my follow up question now, just curious what you're hearing from like origination partners as we enter like peak housing season and has the recent move up in like interest rates changed any impact there?
Speaker Change: Got it that's helpful. And then my follow up to that was just.
Nathaniel Howe Colson: Like where do you think delinquencies normalize on like I said, you say like relative to <unk> levels, but I realize that you think they're going to go upwards, but like how much higher do they go like until things normalize and if I could ask my follow up now to.
Nathaniel Howe Colson: I'm just curious what youre hearing from like origination partners as we enter like peak hunting season and has the recent move up in interest rates changed any impact there.
Nathaniel Howe Colson: I'm sorry, it's probably the audio on our end. But were you asking about delinquency rates normalizing or something else? Yeah.
Nathaniel Howe Colson: Okay.
Speaker Change: I'm sorry.
Speaker Change: It's probably the audio on our end, but were you asking about delinquency rates normalizing or something else.
Nathaniel Howe Colson: Yeah, so on the first part, sorry, like delinquencies, like rates going higher, just curious as to whether or not we think that normalizes out at like a steady state level. And then just my follow up would be on like, what you're hearing from origination partners as we enter peak housing season and like has the higher interest rate environment as that kind of tick back up, and how those conversations changed over the last couple of months.
Speaker Change: So on the first part sorry.
Nathaniel Howe Colson: Delinquencies of grades going higher.
Nathaniel Howe Colson: Im curious within that normalizes out like a steady state level and then just my follow up would be on like what Youre hearing from origination partners as we enter peak housing season, and Mike has the higher interest rate environment is it kind of ticked back up have those conversations changed over the last couple of couple of months.
Nathaniel Howe Colson: Got it. I'll let Tim cover the origination question, but on the delinquency rates, I mean, we're in kind of the low 2% right now for us on a count basis delinquency rate. You know, we've said that we think new notices may take a little bit higher, but in a, you know, kind of typical or the type of economic environment that we've been experiencing recently, I think that probably stays in the 2 to 3% range. Um, the really what we were trying to call out is that the movement down this quarter we don't think is indicative of, you know, an expectation that a move down will continue.
Speaker Change: Got it.
Nathaniel Howe Colson: I'll, let Tim cover the origination question, but on the delinquency rates I mean, we are in kind of the low 2% right now for us on our call.
Nathaniel Howe Colson: Basis delinquency rate.
Nathaniel Howe Colson: Said that we think we noticed this may take a little bit higher but.
Nathaniel Howe Colson: Kind of a typical or the type of economic environment that we've been experiencing recently.
Nathaniel Howe Colson: Think that's probably stays in the 2% to 3% range.
Nathaniel Howe Colson: The really what we're trying to call out is that the movement down in this quarter. We don't think is indicative of.
Nathaniel Howe Colson: And expectation that our move downward continue but.
Nathaniel Howe Colson: But obviously, delinquency rates for us are, and for mortgages in general, very tied to unemployment. So, you know, if the unemployment rate remains very low, like it is right now, that will be, that'll be beneficial for delinquencies. But if unemployment or the macroeconomic condition worsens, then I think delinquency rates will react to that as well.
Nathaniel Howe Colson: Obviously delinquency rates for us or.
Nathaniel Howe Colson: For mortgages in general are very tied to unemployment. So if unemployment rate remains very low like it is right now that will be that will be beneficial for delinquencies, but.
Nathaniel Howe Colson: If unemployment under the macroeconomic condition worsens.
Nathaniel Howe Colson: I think the delinquency rates will will react to that as well.
Timothy James Mattke: Tim, just, I guess, to answer your question on what we're hearing from originators and the origination market, I think it's safe to say that, you know, we thought this year for them could be a little bit of a challenge, just not a ton of volume and not, you know, meaningfully higher than last year. Obviously, there was some hope, I think, from some corners coming into the year that, you know, interest rates, you know, the interesting dilemma that we have, though, as far as supply of housing coming on the market, where you have this lock-in effect that we talked about, that there's just not a lot of supply coming, and there's not a lot of incentives for people to put their homes on the market.
Nathaniel Howe Colson: Tim just I guess to answer your question on what we're hearing from from originators in the origination market I think it's safe to say that we thought this year for them could be a little bit of a challenge.
Timothy James Mattke: A ton of volume, but not meaningfully higher than what last year. Obviously, there was some hope.
Timothy James Mattke: Thank you from some corners coming into the year that.
Timothy James Mattke: Interest rates.
Timothy James Mattke: Reductions over the course of the year might spur a little bit more activity I think it's safe to say theres, a little bit more pessimism around that at this point.
Timothy James Mattke: From our standpoint, though I think we still feel like from an origination standpoint pretty similar position that we were at the beginning of the year, because we werent going to see a lot of refi volume.
Timothy James Mattke: I do think there is I'm a believer in that people do get somewhat accustomed to interest rates and feel more comfortable transacting. There I do think this is an interesting dilemma that we have though as far as supply of housing coming out of the market, where you have this lock in effect that we talked about that there's just not a lot supply coming in there is not a lot of incentive for people to put their homes on the market.
Timothy James Mattke: And so I think that that's creating a pretty strong tension as far as where.
Timothy James Mattke: Where home prices are.
Timothy James Mattke: And so I think that that's creating a pretty strong tension as far as where home prices are, you know, bringing supply to the market to actually create enough origination volume. But it is, as we said in our opening comments, surprising to see such a lot of support for home prices, which is good from our standpoint and overall. That's helpful, thank you.
Timothy James Mattke: Bringing supply in the market to actually create enough origination volume, but as we said in her opening comments, it's sort of surprising a lot of support for home prices.
Timothy James Mattke: Which is which is good from our standpoint on an overall basis.
Nathaniel Howe Colson: That's helpful. Thank you. And sorry about the audio.
Speaker Change: That's helpful. Thank you and sorry about the audio.
Nathaniel Howe Colson: Sure.
Operator: Now we're going to take our next question, and the question comes from the line of Doug Harter from UBS. Your line is open, please ask your question.
Speaker Change: Now we're going to take our next question.
Operator: Yeah.
Douglas Michael Harter: The question comes from the line of <unk> <unk> from UBS. Your line is open. Please ask your question.
Douglas Michael Harter: Thanks and good morning. I was hoping you could talk about the opportunity to retire some of your older reinsurance deals as a potential use of capital and, you know, kind of how the returns on that look today.
Douglas Michael Harter: Thanks, and good morning.
Douglas Michael Harter: Hoping you could talk about the opportunity to retire some of your older.
Douglas Michael Harter: Reinsurance deals as a potential use of capital and kind of how the returns on that look today.
Nathaniel Howe Colson: Thanks for the question. It's Nathan.
Douglas Michael Harter: Okay. Thanks for the question it's Nathan.
Nathan: That is something that we built into a lot of our reinsurance agreements, especially in the traditional reinsurance market.
Nathaniel Howe Colson: That is something that we've built into a lot of our reinsurance agreements, especially in the traditional reinsurance market. We have already exercised a lot of those options. So, you know, we've recaptured the risk, I think, really up through 2020, and have some options, you know, upcoming on 2021 related deals. The ILN market is a little bit different. There's no, you know, kind of natural ways to cancel outside of the kind of five or six or seven-year calls, depending on the deals. We have done a tender offer for some older tranches of deals that we wanted to recapture there.
Nathan: We have exercised a lot of those options. So we recaptured the risk.
Nathaniel Howe Colson: Think really up through 2020.
Nathaniel Howe Colson: Some options upcoming on on 2021 related deals the island market is a little bit different.
Nathaniel Howe Colson: There is no kind of natural ways to cancel outside of the kind of five or six or seven year calls depending on the deals.
Nathaniel Howe Colson: We have done a tender offer for some some older tranches of deals that we wanted to recapture there but.
Nathaniel Howe Colson: But it is something that we continuously evaluate as we think about not only, you know, what does our retained risk profile look like with and without reinsurance? What is our kind of target PMIR's, you know, kind of excess capital position, and how would that be impacted? And then I think more than anything, our strategy is really to focus reinsurance buying on the most recent vintages, where we think there's the most kind of economic risk, the most volatility of financial results and modeled results.
Nathaniel Howe Colson: But it is something that we continuously evaluate something that as we think about not only what is our retained risk profile look like with and without reinsurance.
Nathaniel Howe Colson: Our kind of target P Myers.
Nathaniel Howe Colson: Excess capital position, how would that be impacted.
Nathaniel Howe Colson: And then I think more than anything our strategy is really to focus reinsurance buying on the most recent vintages, where we think there is the most kind of economic risk.
Nathaniel Howe Colson: So, when you look at our reinsurance program today, it's really concentrated in the last two or four years, and we've effectively captured and recaptured everything from 2020 and prior and are kind of holding all of that risk ourselves at this point. So, I'm very happy with how the reinsurance program is situated today. You know, obviously, you have to keep doing new deals and keep managing deals as they get older to keep maintaining the position that we have today.
Nathaniel Howe Colson: The most volatility.
Nathaniel Howe Colson: <unk> financial results have modeled results. So when you look at our reinsurance program today, it's really concentrated in the last two.
Nathaniel Howe Colson: Three or four years, and we've effectively captured we captured everything from 2020 and prior are kind of holding all of that risk.
Nathaniel Howe Colson: Ourselves at this point, so we're very happy with how the reinsurance program are situated today.
Nathaniel Howe Colson: So, you know, I'd expect that they will continue to evaluate those things. And like we have in the past, and we think that they make sense for us to do, you know, feel comfortable recapturing that season risk.
Nathaniel Howe Colson: Obviously, you have to you have to keep doing new deals and keep managing deals as they get older to keep maintaining the position that we have today.
Nathaniel Howe Colson: So I would expect that that will continue to evaluate those things and like we have in the past and we think that it makes sense for us to do.
Nathaniel Howe Colson: We don't feel comfortable recapturing that Susan risk.
Douglas Michael Harter: I appreciate the answer. Thank you.
Nathaniel Howe Colson: Okay.
Nathaniel Howe Colson: Okay.
Speaker Change: I appreciate the answer thank you.
Douglas Michael Harter: Okay.
Speaker Change: Thank you. Thank you.
Operator: Dear Speakers, there are no further questions. I will now turn the call back over to the management for closing remarks.
Speaker Change: Dear speakers there are no further questions I will now turn the call back over to the management for closing remarks.
Dianna L. Higgins: Thank you, Nadia. I want to thank everyone for their interest in MGIC. We will be participating in the VTIG Housing Conference on Tuesday, May 7th. I look forward to talking to all of you in the near future. Have a great rest of your week. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: The the the the the the the the the the the
Speaker Change: Sure. Thank you well.
Dianna L. Higgins: Well I. Thank everyone for your interest in MGIC will be participating in the <unk> housing conference on Tuesday may seven.
Operator: Forward to talking to all of you in the near future have a great rest of your week.
Operator: Ladies and.
Speaker Change: Gentlemen, This concludes today's conference call. Thank you for your participation you may now all disconnect.
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