Q2 2025 MGIC Investment Corp Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the mgic Investment corporation. Second quarter, 2025 earnings call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session.

Dianna Higgins: Thank you, Brittany. Good morning and welcome, everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the second quarter are Tim Mackey, Chief Executive Officer, and Nathan Colson, Chief Financial Officer and Chief Risk Officer. Our press release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom. 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. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk enforcers and other information you may find valuable.

I will now turn the conference over to Diana Higgins, head of investor relations. Please go ahead

on the call today to discuss our results for the second quarter, our Tim Mackey, chief executive officer and Nathan Coulson, Chief Financial Officer and chief risk officer,

Our press release which contains mgi's second quarter Financial results was issued yesterday and is available on our website at MTG mgic.com under Newsroom 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 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. Before getting started today, I want to remind everyone that during the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed on the call today are contained in our Form 8-K and 10-Q 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 development.

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 getting started today, I want to remind everyone that 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

Dianna Higgins: 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 8-K or 10-Q. With that, I now have the pleasure to turn the call over to Tim.

Additional information about the factors that could cause actual results to differ materially from those discussed on the call, today are contained in our Form 8K and 10 Q 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 developments.

Tim Mattke: Thanks, Dianna, and good morning, everyone. In the second quarter, we recorded a net income of $193 million and an annualized return on equity of 15%. Our performance this quarter and throughout the first half of the year reflects our continued disciplined approach to the market, prudent risk and capital management strategies, and our ongoing commitment to creating long-term value for our stakeholders. During the quarter, we wrote $16 billion of new insurance. Insurance enforced the primary driver of our revenue into the quarter at $297 billion. Annual persistency was 85% at the end of the quarter. Both insurance enforced and annual persistency remained relatively flat over the past two quarters, in line with our expectations at the start of the year. We continue to be encouraged by the strong credit performance of our insurance portfolio.

No 1 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 or 10q with that. I now have the pleasure to turn the call over to Tim

Thanks, Diana, and good morning, everyone.

In the second quarter, we recorded net, income of 193 million and an annualized return on Equity of 15%.

Our performance is quarter. And throughout the first half of the Year, reflects our continued disciplined approach to the market, prudent risk and Capital Management strategies and our ongoing commitment to creating long-term value for our stakeholders.

During the quarter, we wrote $16 billion of new insurance.

Insurance and force the primary driver of our revenue, and of the quarter at 297 billion.

Annual persistency was 85% at the end of the quarter.

Both insurance and Forest and annual persistency remain relatively flat over the past 2 quarters in line with our expectations at the start of the year.

Tim Mattke: Our disciplined risk management and strong underwriting standards remain key drivers of the quality of our portfolio, and the new insurance we've written continues to have solid credit characteristics. As always, we remain focused on building and maintaining a high-quality, well-diversified portfolio that supports our long-term success. Turning to capital management, as we discussed on prior calls, our strategy is grounded in maintaining financial strength and flexibility to best position ourselves to navigate and achieve success in a range of economic scenarios. Key objectives include supporting growth by maintaining strong capital at the operating company and the holding company, sustaining a low to mid-teens debt-to-capital ratio, and a healthy liquidity buffer. When these objectives are met, we remain committed to returning excess capital to shareholders through share repurchases and common stock dividends.

We continue to be encouraged by the strong. Credit performance of our insurance portfolio. Our discipline risk management and strong underwriting standards remain key drivers of the quality of our portfolio and the new insurance. We've ridden continues to have solid credit characteristics.

As always, remain focused on building and retaining a high quality well-diversified portfolio that supports our long-term success.

Turning to Capital Management as we discussed on prior calls. Our strategy is grounded. In the maintaining Financial strength and flexibility to best position ourselves to navigate and the chief success in a range of economic scenarios.

Key objectives include supporting growth by maintaining strong Capital at the operating company and the holding company sustaining a low to mid teens debt to Capital ratio and a healthy liquidity buffer.

Tim Mattke: During the second quarter, we continued to allocate excess capital to share repurchases, which totaled 7.1 million shares for $181 million. We also paid a quarterly common stock dividend of $0.13 per share, totaling $31 million. Over the prior four quarters, share repurchases totaled $721 million and shareholder dividends totaled $132 million. Combined, this represents a 112% payout on the net income we earned in the period. In addition, in the third quarter, through July 25th, we repurchased an additional 2.6 million shares of common stock for $68 million. This share repurchase activity continues to reflect our capital strength and solid financial results. As of July 25th, we had $734 million remaining on our current share repurchase authorization. We continue to expect share repurchases will remain our primary method of returning capital to shareholders, while at the same time continuing to pay a quarterly common stock dividend.

when these objectives are met, we remain committed to returning excess Capital to shareholders through share repurchases, and common stock dividends

During the second quarter, we continue to allocate excess Capital to share repurchases which totaled 7.1 million shares for 181 million.

We also paid a quarterly common stock dividend of 13 cents per share. Totaling 31 million.

Over the prior 4 quarters, share repurchases totaled, 721 million and shareholder dividends totaled 132 million combined. This represents a 112% payout on the net income, we earned in the period.

In addition in the third quarter, through July 25th, we were purchased an additional 2.6 million shares of common stock for 68 million.

This year, we purchased activity continues to reflect our Capital strength in solid Financial results.

As of July 25th, we had 734 million remaining on our current share. We purchase authorization

Tim Mattke: As previously announced, in the second quarter, we paid a $400 million dividend from MGIC to the holding company, ending the quarter with $1 billion of liquidity at the holding company. As always, we prioritize prudent growth over capital return. However, market conditions have continued to limit our growth of insurance enforce, a trend we expect will persist through the remainder of the year. As a result, if credit performance remains strong, we anticipate capital levels of both MGIC and the holding company will stay above targets, supporting the continuation of elevated payout ratios. The strong financial position of both the holding company and the operating company were key factors in the board last week authorizing a 15% increase to our quarterly common stock dividend to $0.15 per share, marking five consecutive years of dividend increases, with a compound annual growth rate of 20% over that period.

We continue to expect Sherry purchases or remain our primary method of returning Capital to shareholders while at the same time continue to pay a quarterly common stock dividend.

as previously announced in the second quarter, we paid a hundred million dollar dividend from mgic to the holding company and in the quarter with 1 billion dollars of liquidity at the holding company,

Have continued to limit our growth and of insurance and force. A trend, we expect will persist through the remainder of the year.

As a result, a credit performance remains strong, we anticipate Capital levels of both mgic and the holding company will stay above targets, supporting the continuation of elevated payout. Ratios,

Tim Mattke: Turning more broadly to the current environment, while the housing market continues to face headwinds from elevated interest rates, ongoing affordability challenges, and a slowdown in home sales, we remain encouraged by demographic trends and pent-up demand supporting long-term growth and MI opportunities. Nationally, home price growth is moderated, and many markets, particularly in the South and West, are seeing rising inventory. But to date, the housing market has remained resilient. Now, while affordability remains a challenge for many prospective home buyers, private mortgage insurance continues to play a critical role in helping low-down payment borrowers access homeownership sooner. Now, let me turn it over to Nathan to get into more details on our financial results for the quarter.

The strong financial position of both the holding company and the operating company were key factors in the board last week. Authorizing, a 15% increase to our quarterly common stock dividend to 15 cents per share. Marking 5 consecutive years of dividend increases with a compound annual growth rate of 20% over that period.

Turning more broadly to the current environment, while the housing market continues to face headwinds from elevated, interest rates ongoing affordability, challenges the slowdown, in home sales. We remain encouraged by demographic Trends and pent-up demands supporting long-term growth in me opportunities.

Nationally, home price growth has moderated, and many markets, particularly in the South and West, are seeing rising inventory. But to date, the housing market remains resilient. Our affordability remains a challenge for many prospective home buyers. Private mortgage insurance continues to play a critical role in helping low down payment borrowers access homeownership sooner.

Nathan Colson: Thanks, Tim. Good morning. As Tim discussed, we had solid financial results for the second quarter. We earned a net income of $0.81 per diluted share compared to $0.77 per diluted share during the same period last year. Adjusted net operating income was $0.82 per diluted share compared to $0.77 last year. A detailed reconciliation of GAAP net income to adjusted net operating income can be found in our earnings release. Our solid operating performance and strong balance sheet drove an increase in book value per share to $22.11, an increase of 13% year over year. In the quarter, our re-estimation of ultimate losses on prior delinquencies resulted in $54 million of favorable loss reserve development. The favorable development this quarter primarily came from delinquency notices we received in 2023 and 2024.

now, let me turn it over to Nathan to get into more details on our financial results for the quarter,

Thanks, Tim. Good morning.

As Tim discussed, we have solid Financial results for the second quarter.

We reported a net income of $0.81 per diluted share compared to $0.77 per diluted share during the same period last year.

Adjusted net operating income was 82 cents per diluted share compared to 77 cents last year.

A detailed reconciliation of gaap, net income to adjusted net. Operating income can be found in our earnings release.

Our solid operating performance and strong balance sheet drove an increase in book value per share to $22.11, an increase of 13% year-over-year.

in the quarter, our re-estimation of ultimate losses on prior delinquencies, resulted in 54, million of favorable loss, reserved development,

Nathan Colson: Curing rates on recent delinquency notices continued to exceed our expectations, and we adjusted our ultimate loss expectations accordingly. For new delinquency notices, we continue to use the initial claim rate assumption of 7.5%, which is consistent with recent quarters. Taking a look at delinquency trends, our count-based delinquency rate decreased nine basis points in the quarter to 2.21%, consistent with the seasonal trends we have discussed on past calls. Historically, February, March, and April are seasonally the best months for mortgage credit performance. We continue to see evidence that seasonal credit trends have returned after being disrupted during the pandemic. As a result, we do not expect a decrease in the delinquency rate in the first half of the year. We'll continue in the back half of the year.

The favorable development, this quarter primarily came from delinquency notices. We received in 2023 and 2024

Cure rates on recent delinquency notices, continue to exceed our expectations and we adjusted our ultimate loss expectations accordingly.

For new delinquency notices, we continue to use the initial claim rate, Assumption of 7 and a half percent, which is consistent with recent quarters.

Taking a look at the Lincoln C Trends. Our count based delinquency rate, decreased 9 basis points in the quarter to 2.21% consistent with the seasonal Trends. We have discussed on past calls

Historically February, March and April are seasonally the best months for mortgage credit performance. We continue to see evidence that seasonal. Credit Trends have returned after being disrupted during the pandemic.

Nathan Colson: We received 12,000 new delinquency notices in the second quarter, 5% higher than the second quarter of last year and 7% less than the second quarter of 2019. Cures outpaced new notices in the quarter, reflecting the seasonality we've been discussing. Although the delinquency rate at the end of the second quarter was 12 basis points higher than a year ago, the number of new notices and the delinquency rate remain low by historical standards. Looking ahead, we continue to expect that the combination of seasonality and the aging of our large 2021 and 2022 book year vintages into what are historically higher loss emergency years will result in an increase in new delinquency notices and the delinquency rate in the second half of the year.

As a result, we do not expect a decrease in the delinquency rate. In the first half of the year, we'll continue in the back half of the year.

We received 12,000 new delinquency, notices in the second quarter 5% higher than the second quarter of last year and 7% less than the second quarter of 2019.

Here's outpace new notices in the quarter, reflecting the seasonality we've been discussing.

Although the delinquency rate at the end of the second quarter was 12 basis points higher than a year ago, the number of new notices and the delinquency rate remained Low by historical standards.

Looking ahead, we continue to expect that the combination of seasonality and the Aging of our large 2021 and 2022. Book year vintages into what our historically higher loss, emergency years will result in an increase in noodle. Lengthy notices.

Nathan Colson: The enforced premium yield was 38.3 basis points in the quarter, relatively flat sequentially and with the second quarter last year, and consistent with what we expected. As I mentioned on prior calls, with high persistency expected again this year and MI origination trends similar to last year, we continue to expect the enforced premium yield to remain relatively flat for 2025. Investment income continues to contribute meaningfully to our revenue. The book yield on the portfolio was 4% at the end of the second quarter, relatively flat quarter over quarter, but up 10 basis points from a year ago. Net investment income was $61 million in the quarter, relatively flat sequentially and year over year. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield. However, we anticipate the overall book yield will remain relatively flat for the remainder of the year.

And the delinquency rate in the second half of the year.

The enforced premium yield was 38.3 basis points in the quarter.

Relatively flat flat sequentially. And with the second quarter last year and consistent with what we expected.

as I mentioned on prior calls with high persistency expected again this year and am I origination Trend similar to last year we continue to expect the enforce premium yield to remain relatively flat for 2025

Investment income continues to contribute meaningfully to our Revenue. The book yield on the portfolio was 4% at the end of the second quarter, relatively flat quarter of a quarter but up, 10 basis points from a year ago.

Net investment income was 61 million in the quarter, relatively flat sequentially and year-over-year.

during the quarter reinvestment rates, on our fixed income portfolio continued to exceed, our book yield

Nathan Colson: This is primarily due to a decline in shorter-term interest rates and elevated levels of capital return, both of which limit the growth of the investment portfolio. The unrealized loss position on our portfolio narrowed by $36 million, primarily driven by a decrease in interest rates. We remain focused on discipline expense management and continuing to drive operational efficiency across the organization. Operating expenses were $52 million this quarter, down from $55 million in the second quarter last year. Included in operating expenses this quarter was a $4 million accounting charge related to lump sum settlements from our pension plan due to the amount of those settlements. As a reminder, we froze the pension plan at the end of 2022, but as the plan gets smaller, we are more likely to trigger these accounting charges as lump sum settlements are paid out of the plan.

However, we anticipate the overall book yield will remain relatively flat for the remainder of the year.

This is primarily due to a decline in shorter term, interest rates and elevated levels of capital return, both of which limit the growth of the Investment Portfolio.

On our portfolio, narrowed by 36 million primarily driven by a decrease in interest rates.

We remain focused on discipline expense management and continuing to drive operational efficiency across the organization.

Operating expenses were 52 million this quarter down from 55 million in the second quarter last year.

Included in operating expenses. This quarter was a million dollar accounting. Charge related to lump sum settlements from our Pension Plan, due to the amount of those settlements.

Nathan Colson: We continue to expect the full-year operating expenses will be in the range we previously provided of $195 million to $205 million. As Tim mentioned earlier, our capital management strategy is grounded in maintaining flexibility and resilience in various environments. Our capital structure includes $6 billion of balance sheet capital, and our well-established reinsurance program remains a key component of our risk and capital management strategies. In addition to reducing the loss volatility and stress scenarios, our reinsurance agreements provide capital diversification and flexibility at attractive costs and reduced our PMI's required assets by $2.5 billion, or approximately 43% at the end of the second quarter. We further bolstered our reinsurance program in the second quarter with two excessive loss agreements with panels of highly rated reinsurers to cover most of our 2025 and 2026 NIW.

As a reminder, we froze the pension plan at the end of 2022, but as the plan gets smaller, we are more likely to trigger these accounting charges. As lump sum settlements are paid out of the plan.

We continue to expect the full year. Operating expenses will be in the range. We previously provided of 195 million to 205 million.

As Tim mentioned earlier, our Capital Management strategy is grounded in maintaining flexibility and resilience in various environments.

Our capital structure includes 6 billion dollars of balance sheet capital and our wall established reinsurance program remains a key component of our risk and Capital Management strategies.

In addition to reducing the loss volatility and stress scenarios, our reinsurance agreements, Provide Capital diversification and flexibility at attractive costs and reduce our pmrs required assets by 2.5 billion dollars or approximately 43% at the end of the second quarter.

We further bolstered our reinsurance program in the second quarter, with 2 excess of loss, agreements with the panels of highly rated reinsurers.

Nathan Colson: These reinsurance agreements complement the 40% quota share agreements we had in place at the start of the year to cover the same NIW. With that, let me turn it back over to Tim.

To cover most of our 2025 and 2026 and IW.

These reinsurance agreements complement the 40% quota share agreements we had in place at the start of the year to cover the same NIW.

Tim Mattke: Thanks, Nathan. A couple of additional comments before we open it up for questions. The passing of One Big Beautiful Bill Act restores and makes permanent the tax deduction of MI premium, delivering meaningful tax relief to homeowners without increasing risk to the housing finance system. We are very pleased with the inclusion of this deduction in the tax relief that will be delivered to millions of homeowners. Private MI allows low-down payment home buyers to get off the sidelines and achieve the American dream of homeownership sooner. In closing, I am pleased with our financial performance of the second quarter and throughout the first half of the year. As we look ahead, our focus remains on driving long-term value creation for our shareholders while continuing to support our customers with high-quality products and solutions. Together, we are helping low-down payment borrowers achieve the dream of homeownership sooner.

With that, let me turn it back over to Tim.

Thanks, Nathan.

Couple additional comments before we open it up for questions.

The passing of 1, big beautiful, bill act, restores and makes permanence the tax deduction of me, premium delivering, meaningful tax relief to homeowners without increasing risk to the Housing Finance system. We are very pleased with the inclusion of this deduction of the tax relief that will deliver to millions of homeowners.

Private me allows low down payment home buyers to get off the sidelines and achieve the American dream of home ownership sooner.

In closing, I am pleased with our financial performance at the second quarter, and throughout the first half of the year.

As we look ahead, our Focus remains on driving long-term value creation for our shareholders. While continuing to support our customers with high-quality products and solutions.

Tim Mattke: With that, Brittany, let's take question.

Together, we are helping hold low down payment borrowers achieve the dream of homeownership sooner.

Speaker 5: Thank you. At this time, we will conduct our question and answer session. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Doug Carter with UBS. Your line is now open.

With that. Britney, let's take questions.

Thank you.

At this time, we will conduct our question and answer session.

Tax of question, you will need to press star 1, 1 on your telephone, and wait, for your name to be announced.

To withdraw your question, please press *1 1.

Please stand by while we compile the Q&A roster.

Douglas Harter: Thanks, and good morning. You know, kind of can you remind us, you know, how you are thinking about sizing the level of capital return you're doing, you know, how you're thinking about, you know, the amount of hold co-liquidity you want to hold, and, you know, kind of what are the, you know, gating factors as far as getting dividends up from the MI subsidiary?

Our first question comes from the line, Doug, Carter with UBS, your line is now open.

Uh, thanks and good morning.

Nathan Colson: Yeah, Doug, it's Nathan. Thanks for the question. Maybe I'll start at the operating company level. You know, we've been paying, you know, dividends twice a year for the last several years in the range of, you know, $300 to $400 million every six months, and that's really been driven based on, you know, excellent credit performance and excellent financial results that are, you know, continuing to generate a lot of organic capital that we've been able to dividend out. So I think the first order condition for us is continued, you know, excellent financial results, not feeling like we can prudently redeploy that capital at the operating company into growth. That would always be the priority, but we just don't think that the current environment really supports that right now.

Um, you know, kind of can you remind us? Um, you know, how you are thinking about sizing, uh, the level of capital or return, you're doing, you know how you're thinking about. You know, the amount of hold Co liquidity uh you want to hold and you know kind of what are the um you know gating factors. As far as getting uh dividends up from the uh me subsidiary.

Nathan Colson: So, you know, if the credit conditions continue to be attractive and the lack of growth on the enforced side persists, then, you know, we expect that we will continue to generate excess capital and be able to continue to pay dividends from the operating company, the holding company. I think the size of those dividends is dependent on a number of factors, but, you know, as long as our capital levels are above our targets, you know, I think dividends at similar levels to what we've paid out the last couple of years are kind of how we would think about things going forward. And then at the holding company level, you know, we do have, you know, about $1 billion in cash at the end of Q2, and that's really been because of the larger dividends that we've paid.

Nathan Colson: I think we've got the debt-to-capital position where we want it, and, you know, all of these things have supported the elevated payout ratios that Tim has talked about, you know, a little more than 110% over the trailing four quarters and, you know, similar level in Q2. So I think, you know, if we continue in this environment where it's hard for us to prudently grow, but credit conditions remain favorable and financial results are excellent, you know, then, you know, we do think that elevated payout ratios can continue.

Then, you know, we expect that we will continue to generate excess capital and be able to continue to pay dividends from the operating company. The holding company. I think the size of those dividends is dependent on a number of factors, but, you know, as long as our Capital levels are above our targets, um, you know, I think dividends at similar levels to what we've paid out the last couple of years, um, are are kind of how we would think about things going forward, um, and then at the holding company level, you know, we do have, um, you know, about a billion dollars in cash at the end of Q2. And that's really been, um, because of the larger dividends that we've paid, I think we've got the debt to Capital position where we want it and, you know all of these things have supported the the elevated payout ratios. That Tim has talked about, you know, a little more than 110% over the trailing um, 4 quarters and, you know, similar level in Q2. So I think uh, you know, if if we continue in this environment where um, it's hard for us to prudently grow a credit conditions, remain.

Remain favorable and financial results are excellent. Um, you know, then you know we we do think that elevated payout ratios can continue.

Douglas Harter: And I guess just taking the other side, if these conditions continue, I mean, what, you know, could there be a case where you could, you know, even increase the payout, you know, further, just given the strong capital and strong, you know, capital generation?

Nathan Colson: At the operating company level, you know, we are constrained at some level by our contingency reserve balance. So we do still have, you know, enough statutory surplus to continue to pay out dividends at these levels, but we have been drawing down that surplus level over time. So there is kind of a natural governor there over time. But, you know, I think for us, we do like to think about, you know, it's a long-term business. We like to think about things in the long term. So the idea of kind of resetting the capital levels with, you know, maybe significant returns at any one time is not likely how we would approach it.

And I guess just taking the other side. If, if these conditions continue, I mean, what you know, could there be a case where you could, you know, even increase the payout, you know, further just given the strong Capital um and and strong, you know, Capital generation.

Nathan Colson: I think this, you know, elevated payout ratios as a way to, you know, slowly draw down the excess capital while keeping an eye on what's going on in the market is what's been our approach the last several years, and, you know, I think it's worked well for us, and I think that's how we would think about it going forward.

Douglas Harter: Great. I appreciate the answer. Thank you.

Wait at the operating company level. You know, we are, uh, constrained at some, at some level by our contingency, reserve balance. So um, we do still have, you know, enough statutory Surplus to continue to to pay out dividends that these levels, but we have been drawing down that Surplus level over time. So there is kind of a natural Governor there over time. Um, but you know, I think for, for us, we do like to think about, you know, it's a long-term business. Um, we like to think about things in the long term. So the idea of the resetting, the capital levels with, you know, maybe significant returns at any 1 time is, is not likely how we would approach it. I think this, um, you know, elevated payout ratios as a way to, you know, slowly draw down. Uh, the excess Capital involved, keeping an eye on what's going on in the market is, what's been our approach to the last several years. And, you know, I think it's worked well for us and I think that's how we would think about it, going forward.

Nathan Colson: Yeah, thank you.

Great. I appreciate the answer. Thank you.

Speaker 5: Thank you so much. Our next question comes from a line of Bo's George with KBW. Your line is now open.

Yeah, thank you.

Thank you so much.

Douglas Harter: Hey, good morning. Can you talk about your expectations for home prices and to the extent that home prices continue to slow or, you know, potentially turn negative? You know, could we see the industry pricing, you know, adjust for that?

All right, next question comes from the line of Bose George with KBW, your line is now open.

Nathan Colson: Yeah, Bo's, it's Nathan. Thanks for the question. You know, I think a lot of the forecasts right now for national home prices are really flat over the next several years. So, but increasingly, it looks like different parts of the country, you know, may behave differently. And, you know, places like Florida, Texas, you know, across the South and the West, you know, it feels like there's, you know, maybe more supply than demand in some markets in the Northeast and Midwest, you know, kind of the opposite dynamic. So, I think one of the things that is most attractive about risk-based pricing for us is that we really can price risk at a very granular level, including, you know, all kinds of factors like the market that a particular property is in.

Yes. Good morning. Uh can you talk about your expectation for home prices and to the extent? You know home prices continue to slow or you know potentially turn negative, you know, could we see the industry pricing, you know, adjust for that.

Nathan Colson: So for us, this is something that, you know, is just part of our day-to-day operations too, to think about the risks in the markets that we take, the risks with the products that we insure. And, you know, it's another factor that certainly goes into pricing. I think pricing is pretty dynamic to the risks that we feel like we're facing, and we have the ability to modify that, you know, very quickly to be reactive. But I think right now, these are risk factors, not really things that we're seeing in terms of realizing those risks. There aren't, you know, large parts of the country where we're seeing home price declines. And in a long-term sense, slowing home price appreciation, you know, kind of de-risk things over the long term.

Yep, proposes Nathan. Um, thanks for the question, you know, I I think a lot of the forecasts, right now, for National home, prices are are really flat over the next several years. So, um, but increasingly it looks like different parts of the country. You know, may behave differently. Um, and you know places like, uh, Florida Texas, you know, across the South and the West, um, you know, feels like there's, you know, maybe more Supply than demand in some markets, um, in the Northeast and Midwest, you know, have the opposite Dynamics. So, um, and 1 of the things that that is, uh, most attractive about risk based pricing for US, is that we really can, um, price risk at a very granular level, including, you know, all kinds of factors like the market, that, that a particular property is in. So, um, for us, this is something that, you know, is just part of our day-to-day operations, too, to think about the risks in the markets that we take the risks with, uh, the products that we

Nathan Colson: So I think, you know, if we see home price declines in some areas, we have a very geographically diverse portfolio, you know, feel like we're in a great position for that. But seeing longer periods here with low single-digit home price growth, I think is long-term good for our performance because I think the thing that we worry the most about is that home price growth is really not sustained, and then that could lead to more significant home price declines in the future. So something that we're watching every day, and, you know, I think increasingly, it does look like certain parts of the country are behaving differently or have different supply-demand dynamics than other parts of the country.

Nathan Colson: But, you know, we're in a position to react to that now in a way that we really weren't in a position to react to when we used rate cards, you know, prior to, you know, maybe six, seven years ago. So, you know, like I said, just kind of a core part of what we do and something that, you know, we were monitoring when, you know, when home prices were going up everywhere. You know, we'll continue to monitor it kind of no matter what the situation, just because it's so fundamental to our business.

Not sustained. And then that could lead to more significant home price declines in the future. So, um, something that we're watching every day and, you know, I think increasingly it does look like certain parts of the country are behaving differently or have different Supply demand Dynamics than, than other parts of the country. But, you know, we're in a position to react to that. Now, in a way, that we really weren't in a position to react to when we, when we use rate cards, um, you know, prior to, you know, maybe 6 7 years ago, um,

Douglas Harter: Okay, that makes sense. Thank you. And then actually switching to the OpEx guidance, the 195 to 205, does that exclude, you know, that $4 million? And then just going forward, is that kind of a number that we could see like maybe annually or something till that thing, till that pension thing runs out fully?

So like I said, just kind of a a core part of what we do. And, and something that, you know, we were monitoring when, um, you know, when home prices were going up everywhere, you know, we'll, we'll continue to monitor it. Kind of no matter what the situation just because it's so fundamental to our business.

Nathan Colson: Yes, the $4 million charge that we incurred in the second quarter is in, obviously, the Q2 number, and it's in the full year kind of reiteration of the guidance that we have. So we think that even after the $4 million charge that we had, and we do expect to have, you know, smaller, but still have charges again in the third and fourth quarter based on lump sum activity. But, you know, that's all in the expectations for the full year now. And, you know, going forward, you know, we'll have that in the expense guide. But it is something that in the footnotes of the financial statements is always called out. You know, so there's a footnote about the pension plan. So, you know, you can see it there. You can see it over time there.

Okay, that makes sense. Thank you. And then actually switching to the Opex guidance, the $195 million to $205 million, does that exclude, you know, that $4 million? And then just going forward, is that kind of a number that we could see like maybe annually or something till that pension thing runs up fully?

Do yes. It the the 4 million charge that we incurred in the in the uh second quarter is in obviously the Q2 number and it's in the full year um, kind of reiteration of the guidance that we have. So I mean we think that even after the 4 million dollar charge that we had, and we do expect to have um, you know, smaller but but still have charges again in the third and fourth quarter, based on lump sum activity. But, you know, that's all in the

Nathan Colson: You know, just called it out here because it was a large enough item and kind of unique enough to the second quarter that just wanted to highlight it for everyone.

Douglas Harter: Okay, helpful. Thank you.

Expectations for the full year now and, you know, going forward, um, you know, we'll have that in the expect, you know, in the, in the expense guide. Um, but it is something that in the footnotes of the financial statements is always called out. Um, you know, so there's a footnote about the pension plan so you can you can see it there, you can see it over time there, um, you know, just called it out here because it was, uh, you know, it was a large enough item and kind of unique enough to the second quarter um that just wanted to highlight it for for everyone.

Okay, thank you.

Speaker 5: Thank you so much. There are no further questions. I would now like to turn the call back over to management for closing remarks.

Thank you so much.

Tim Mattke: Thank you, Brittany. I want to thank everyone for your participation in today's call and interest in MGIC. We will be participating in the Barclays Financial Services Conference and the Zelman Housing Summit in September. I look forward to talking to all of you again in the near future. Have a great rest of your week.

There are no further questions. I would now like to turn the call back over to management for closing remarks.

Speaker 5: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you. Brittany. I want to thank everyone for your participation in today's call and interest in mgic. We will be participating in the Barclays Financial Services conference and the zelman housing Summit in September. I look forward to talking to all of you again in the near future. Have a great rest of your week.

Ladies and gentlemen, this concludes today's conference call, thank you for participating. You may now disconnect