MGIC Investment Q4 2025 MGIC Investment Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 MGIC Investment Corp Earnings Call
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the MGIC Investment Corporation Q4 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'll have a question and answer session. If anyone should require to ask a question at this time, please press star one one on your telephone keypad. At this time, I would like to turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the MGIC Investment Corporation Q4 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'll have a question and answer session. If anyone should require to ask a question at this time, please press star one one on your telephone keypad. At this time, I would like to turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.
Speaker #1: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the MGIC Investment Corporation fourth quarter 2025 earnings call. At this time, all lines have been placed on mute to prevent any background noise.
Speaker #1: At the end of today's presentation, we'll have a question-and-answer session. If anyone should require to ask a question at this time, please press star 11 on your telephone keypad.
Speaker #1: At this time, I would like to turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.
Speaker #1: ahead. Thank you,
Dianna Higgins: Thank you, Howard. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on today's call to discuss our results for the fourth quarter are Tim Mattke, Chief Executive Officer, and Nathan Colson, Chief Financial Officer and Chief Risk Officer. Our press release, which contains MGIC's fourth quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom, and includes additional information about our quarterly results that we will reference during today's call, as well as a reconciliation of non-GAAP financial measures to their most comparable GAAP measures. In addition, we posted a quarterly supplement on our website that provides details about our primary risk in force and other information you may find valuable. As a reminder, from time to time, we may post updates to our underwriting guidelines, additional presentations, or corrections to past materials on our website.
Dianna Higgins: Thank you, Howard. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on today's call to discuss our results for the fourth quarter are Tim Mattke, Chief Executive Officer, and Nathan Colson, Chief Financial Officer and Chief Risk Officer. Our press release, which contains MGIC's fourth quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom, and includes additional information about our quarterly results that we will reference during today's call, as well as a reconciliation of non-GAAP financial measures to their most comparable GAAP measures. In addition, we posted a quarterly supplement on our website that provides details about our primary risk in force and other information you may find valuable. As a reminder, from time to time, we may post updates to our underwriting guidelines, additional presentations, or corrections to past materials on our website.
Speaker #2: Howard. Good morning and welcome, everyone. Thank you for your interest in MGIC. Joining me on today's call to discuss our results for the fourth quarter are Tim Mattke, Chief Executive Officer, and Nathan Colson, Chief Financial Officer, and Chief Risk Officer.
Speaker #2: Our press release, which contains MGIC's fourth quarter financial results, was issued yesterday and is available on our website at mtgmgic.com under Newsroom and includes additional information about our quarterly results, that we will reference during today's call, as well as a reconciliation of non-GAM financial measures to their most comparable GAM measures.
Speaker #2: In addition, we posted a quarterly supplement on our website that provides details about our primary risk in force and other information you may find valuable.
Speaker #2: As a reminder from time to time, we may post updates to our underwriting guidelines, additional presentations, or corrections to past materials on our website.
Speaker #2: Before we get started today, I want to remind everyone that during today's call, we may make forward-looking statements regarding our expectations for the future.
Dianna Higgins: Before we get started today, I want to remind everyone that during today's call, we may make forward-looking statements regarding our expectations for the future. Actual results could differ materially from those expressed in these forward-looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed in today's call is included in our 8-K 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. 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. With that, I now have the pleasure of turning the call over to Tim.
Before we get started today, I want to remind everyone that during today's call, we may make forward-looking statements regarding our expectations for the future. Actual results could differ materially from those expressed in these forward-looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed in today's call is included in our 8-K 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. 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. With that, I now have the pleasure of turning the call over to Tim.
Speaker #2: Actual results could differ materially from those expressed in these forward-looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed in today's call is included in our 8-K filed yesterday.
Speaker #2: 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 this call or the issuance of our 8-K.
Speaker #2: With that, I now have the pleasure of turning the call over to Tim.
Speaker #3: Thank you, Dianna, and good morning, everyone. We delivered another quarter of solid financial results, closing 2025 strong and entering the new year from a position of strength.
Timothy Mattke: Thank you, Dianna, and good morning, everyone. We delivered another quarter of solid financial results, closing 2025 strong and entering the new year from a position of strength. This performance is a continuation of the sustained momentum we've built over the past several years. Our performance stems from being grounded in decades of experience across a wide range of market cycles, disciplined risk management, and a thoughtful, measured approach to the market. We pair our expertise with a customer-centric mindset, continually evolving to meet the changing needs of our customers and the broader market. Turning to a few financial highlights, in the quarter, we earned net income of $169 million, producing an annualized 13% return on equity.
Tim Mattke: Thank you, Dianna, and good morning, everyone. We delivered another quarter of solid financial results, closing 2025 strong and entering the new year from a position of strength. This performance is a continuation of the sustained momentum we've built over the past several years. Our performance stems from being grounded in decades of experience across a wide range of market cycles, disciplined risk management, and a thoughtful, measured approach to the market. We pair our expertise with a customer-centric mindset, continually evolving to meet the changing needs of our customers and the broader market. Turning to a few financial highlights, in the quarter, we earned net income of $169 million, producing an annualized 13% return on equity.
Speaker #3: This performance is a continuation of the sustained momentum we have built over the past several years. Our performance stems from being grounded in decades of experience across a wide range of market cycles, disciplined risk management, and a thoughtful, measured approach to the market.
Speaker #3: We pair our expertise with a customer-centric mindset, continually evolving to meet the changing needs of our customers and the broader market. Turning to a few financial highlights, in the quarter we earned net income of $169 million, producing an annualized 13% return on equity.
Speaker #3: For the full year, we earned net income of $738 million, and the full-year return on equity was 14.3%. Our strong operating performance and robust balance sheet enabled us to grow book value per share to $23.47.
Timothy Mattke: For the full year, we earned net income of $738 million, and a full year return on equity was 14.3%. Our strong operating performance and robust balance sheet enabled us to grow book value per share to $23.47, 13% higher year-over-year. As I mentioned on last quarter's call, we are proud to have achieved a significant milestone in our company's history and an industry first during the year, surpassing $300 billion of insurance in force. We continue to grow insurance in force in the fourth quarter, ending the year with more than $303 billion, up 3% from a year ago. Annual persistency remained elevated and stable throughout 2025, ending the quarter at 85%, in line with our expectations at the start of the year.
For the full year, we earned net income of $738 million, and a full year return on equity was 14.3%. Our strong operating performance and robust balance sheet enabled us to grow book value per share to $23.47, 13% higher year-over-year. As I mentioned on last quarter's call, we are proud to have achieved a significant milestone in our company's history and an industry first during the year, surpassing $300 billion of insurance in force. We continue to grow insurance in force in the fourth quarter, ending the year with more than $303 billion, up 3% from a year ago. Annual persistency remained elevated and stable throughout 2025, ending the quarter at 85%, in line with our expectations at the start of the year.
Speaker #3: Thirteen percent higher year over year. As I mentioned on last quarter's call, we are proud to have achieved a significant milestone in our company's history—an industry first during the year—surpassing $300 billion of insurance in force.
Speaker #3: We continue to grow insurance enforce in the fourth quarter, ending the year with more than $303 billion. Up 3% from a year ago. Annual persistency remained elevated and stable throughout 2025.
Speaker #3: Ending the quarter at 85%, in line with our expectations at the start of the year. We wrote $17 billion of high-quality new business in the fourth quarter, and $60 billion for the full year, an increase of 8% from the prior year.
Timothy Mattke: We wrote $17 billion of high quality new business in Q4 and $60 billion for the full year, an increase of 8% from the prior year. Consensus mortgage origination forecasts project the size of the MI market in 2026 will be relatively similar to 2025, with mortgage rates remaining elevated. Overall, we expect insurance in force to remain relatively flat in 2026. If mortgage rates were to decrease more in 2026 than currently predicted, we expect the size of the MI market would benefit due to increased refinance volume, but growth in insurance in force would be offset by lower persistency. Our focus remains on building and maintaining a strong, well-diversified insurance portfolio. Credit quality of our insurance portfolio remains solid, with an average credit score at origination of 748....
We wrote $17 billion of high quality new business in Q4 and $60 billion for the full year, an increase of 8% from the prior year. Consensus mortgage origination forecasts project the size of the MI market in 2026 will be relatively similar to 2025, with mortgage rates remaining elevated. Overall, we expect insurance in force to remain relatively flat in 2026. If mortgage rates were to decrease more in 2026 than currently predicted, we expect the size of the MI market would benefit due to increased refinance volume, but growth in insurance in force would be offset by lower persistency. Our focus remains on building and maintaining a strong, well-diversified insurance portfolio. Credit quality of our insurance portfolio remains solid, with an average credit score at origination of 748....
Speaker #3: Consensus mortgage origination forecasts project the size of the MI market in 2026 will be relatively similar to 2025, with mortgage rates remaining elevated. Overall, we expect insurance in force to remain relatively flat in 2026.
Speaker #3: If mortgage rates were to decrease more in 2026 than currently predicted, we expect the size of the MI market would benefit due to increased refinance volume, but growth in insurance in force would be offset by lower persistency.
Speaker #3: Our focus remains on building and maintaining a strong, well-diversified insurance portfolio. Credit quality of our insurance portfolio remains solid, with an average credit score at origination of 748.
Speaker #3: To date, we have not seen a material change in the credit performance of our portfolio in early payment defaults remain low. Which we believe is a good indicator of near-term credit trends.
Timothy Mattke: To date, we have not seen a material change in the credit performance of our portfolio, and early payment defaults remain low, which we believe is a good indicator of near-term credit trends. As discussed throughout the year, financial strength and flexibility are the cornerstones of our capital management strategy, positioning us to perform well across a range of economic environments. As part of our strategy, we regularly evaluate capital levels of both the operating company and holding company, taking into account current and potential future environments to position ourselves for success, an approach that has consistently served our stakeholders well. As part of this, we continue to bolster our reinsurance program through the use of forward commitment quota share agreements and excess of loss agreements executed in either the traditional reinsurance or capital markets.
To date, we have not seen a material change in the credit performance of our portfolio, and early payment defaults remain low, which we believe is a good indicator of near-term credit trends. As discussed throughout the year, financial strength and flexibility are the cornerstones of our capital management strategy, positioning us to perform well across a range of economic environments. As part of our strategy, we regularly evaluate capital levels of both the operating company and holding company, taking into account current and potential future environments to position ourselves for success, an approach that has consistently served our stakeholders well. As part of this, we continue to bolster our reinsurance program through the use of forward commitment quota share agreements and excess of loss agreements executed in either the traditional reinsurance or capital markets.
Speaker #3: As discussed throughout the year, financial strength and flexibility are the cornerstones of our capital management strategy, positioning us to perform well across a range of economic environments.
Speaker #3: As part of our strategy, we regularly evaluate capital levels of both the operating company and holding company, taking into account current and potential future environments to position ourselves for success.
Speaker #3: An approach that has consistently served our stakeholders well. As part of this, we continue to bolster our reinsurance program through the use of forward commitment quarter-share agreements, and excess of loss agreements executed in either the traditional reinsurance or capital markets.
Speaker #3: In addition, to reducing loss volatility and stress scenarios, these agreements provide capital diversification and flexibility at attractive costs. We remained active in the reinsurance market in the fourth quarter, and in January.
Timothy Mattke: In addition to reducing loss volatility and stress scenarios, these agreements provide capital diversification and flexibility at attractive costs. We remained active in the reinsurance market in Q4 and in January. In Q4, as previously announced, we further strengthened our reinsurance program with a $250 million excess of loss transaction covering our 2021 NIW, and a 40% quota share transaction that will cover most of our 2027 NIW. We also amended the terms of our quota share treaties covering our 2022 NIW, with most participants from the existing reinsurance panel, reducing the ongoing cost by approximately 40% beginning in 2026. In addition, in January, we completed our eighth insurance-linked note transaction, which provides $324 million of loss protection and covers certain policies written between January 2022 and March 2025.
In addition to reducing loss volatility and stress scenarios, these agreements provide capital diversification and flexibility at attractive costs. We remained active in the reinsurance market in Q4 and in January. In Q4, as previously announced, we further strengthened our reinsurance program with a $250 million excess of loss transaction covering our 2021 NIW, and a 40% quota share transaction that will cover most of our 2027 NIW. We also amended the terms of our quota share treaties covering our 2022 NIW, with most participants from the existing reinsurance panel, reducing the ongoing cost by approximately 40% beginning in 2026. In addition, in January, we completed our eighth insurance-linked note transaction, which provides $324 million of loss protection and covers certain policies written between January 2022 and March 2025.
Speaker #3: In the fourth quarter, as previously announced, we further strengthened our reinsurance program with a $250 million excess of loss transaction covering our 2021 NIW, and a 40% quarter-share transaction that will cover most of our 2027 NIW.
Speaker #3: We also amended the terms of our quarter-share treaties covering our 2022 NIW, with most participants from the existing reinsurance panel, reducing the ongoing cost by approximately 40%, beginning in 2026.
Speaker #3: In addition, in January, we completed our eighth insurance-linked note transaction which provides $324 million of loss protection and covers certain policies written between January 2022 and March 2025.
Speaker #3: These reinsurance activities are aligned with our long-term strategy and reflect our consistent disciplined approach to managing risk and capital. At the end of the fourth quarter, our reinsurance program reduced our PMIRS-required assets by 2.8 billion, or approximately $47%.
Timothy Mattke: These reinsurance activities are aligned with our long-term strategy and reflect our consistent, disciplined approach to managing risk and capital. At the end of Q4, our reinsurance program reduced our PMIER's required assets by $2.8 billion, or approximately 47%. With that, let me turn it over to Nathan to provide more details on our financial results and capital management activities for the quarter.
These reinsurance activities are aligned with our long-term strategy and reflect our consistent, disciplined approach to managing risk and capital. At the end of Q4, our reinsurance program reduced our PMIER's required assets by $2.8 billion, or approximately 47%. With that, let me turn it over to Nathan to provide more details on our financial results and capital management activities for the quarter.
Speaker #3: With that, let me turn it over to Nathan to provide more details on our financial results and capital management activities for the
Speaker #3: quarter. Thanks,
Nathaniel Colson: Thanks, Tim, and good morning. As Tim mentioned, we had another quarter of solid financial results. We earned net income of $0.75 per diluted share, compared to $0.72 during Q4 last year. For the full year, we earned net income of $3.14 per diluted share, compared to $2.89 per diluted share last year. Our re-estimation of ultimate losses on prior delinquencies resulted in $31 million of favorable loss reserve development in the quarter. The favorable development was primarily driven by delinquency notices we received in 2024 and in the first half of 2025, as cure rates on recent new notices continue to exceed our expectations. For new delinquency notices received in the quarter, we continue to apply the initial claim rate assumption of 7.5%, consistent with recent periods.
Nathan Colson: Thanks, Tim, and good morning. As Tim mentioned, we had another quarter of solid financial results. We earned net income of $0.75 per diluted share, compared to $0.72 during Q4 last year. For the full year, we earned net income of $3.14 per diluted share, compared to $2.89 per diluted share last year. Our re-estimation of ultimate losses on prior delinquencies resulted in $31 million of favorable loss reserve development in the quarter. The favorable development was primarily driven by delinquency notices we received in 2024 and in the first half of 2025, as cure rates on recent new notices continue to exceed our expectations. For new delinquency notices received in the quarter, we continue to apply the initial claim rate assumption of 7.5%, consistent with recent periods.
Speaker #2: Tim: Good morning. As Tim mentioned, we had another quarter of solid financial results. We earned net income of $0.75 per diluted share, compared to $0.72 during the fourth quarter last year.
Speaker #2: For the full year, we earned net income of $3.14 per diluted share, compared to $2.89 per diluted share last year. Our reestimation of ultimate losses on prior delinquencies resulted in $31 million of favorable loss reserve development in the quarter.
Speaker #2: The favorable development was primarily driven by delinquency notices we received in 2024 and in the first half of 2025, as cure rates on recent new notices continue to exceed our expectations.
Speaker #2: For new delinquency notices received in the quarter, we continue to apply the initial claim rate assumption of 7.5%, consistent with recent periods. Our count-based delinquency rate increased three basis points from the prior year, and 11 basis points in the quarter.
Nathaniel Colson: Our count-based delinquency rate increased 3 basis points from the prior year and 11 basis points in the quarter. The sequential increase was in line with our expectations and reflects normal seasonal patterns, as well as the continued aging of our 2021 and 2022 book years, as we have discussed on prior calls. The 3 basis point year-over-year increase was the slowest rate of increase since the first quarter of 2024, and we believe reflects the continued normalization of credit conditions that we have discussed throughout the year. Turning to our revenue, the in-force premium yield was 38 basis points in the quarter and remained relatively flat during the year, consistent with what we expected at the start of the year. Given expectations of a similar MI market to 2025, we expect the in-force premium yield to remain near 38 basis points again in 2026.
Our count-based delinquency rate increased 3 basis points from the prior year and 11 basis points in the quarter. The sequential increase was in line with our expectations and reflects normal seasonal patterns, as well as the continued aging of our 2021 and 2022 book years, as we have discussed on prior calls. The 3 basis point year-over-year increase was the slowest rate of increase since the first quarter of 2024, and we believe reflects the continued normalization of credit conditions that we have discussed throughout the year. Turning to our revenue, the in-force premium yield was 38 basis points in the quarter and remained relatively flat during the year, consistent with what we expected at the start of the year. Given expectations of a similar MI market to 2025, we expect the in-force premium yield to remain near 38 basis points again in 2026.
Speaker #2: The sequential increase was in line with our expectations and reflects normal seasonal patterns, as well as the continued aging of our 2021 and 2022 book years, as we have discussed on prior calls.
Speaker #2: The three basis point year-over-year increase was the slowest rate of increase since the first quarter of 2024, and we believe reflects the continued normalization of credit conditions that we have discussed throughout the year.
Speaker #2: Turning to our revenue, the enforce premium yield was $38 basis points in the quarter, and remained relatively flat during the year. Consistent with what we expected at the start of the year.
Speaker #2: Given expectations of a similar MI market to 2025, we expect the enforce premium yield to remain near 38 basis points again in 2026. Investment income totaled $62 million in the fourth quarter, and again contributed meaningfully to revenue.
Nathaniel Colson: Investment income totaled $62 million in Q4 and again contributed meaningfully to revenue. The book yield on our investment portfolio was 4% at the end of the quarter. Investment income remained relatively flat sequentially and year-over-year, as both the book yield and the size of the investment portfolio have also remained relatively flat. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield and remained relatively flat for the year. The unrealized loss position on our portfolio narrowed again this quarter by $16 million, primarily driven by lower interest rates. Underwriting and other expenses in the quarter were $46 million, down from $49 million in Q4 last year.
Investment income totaled $62 million in Q4 and again contributed meaningfully to revenue. The book yield on our investment portfolio was 4% at the end of the quarter. Investment income remained relatively flat sequentially and year-over-year, as both the book yield and the size of the investment portfolio have also remained relatively flat. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield and remained relatively flat for the year. The unrealized loss position on our portfolio narrowed again this quarter by $16 million, primarily driven by lower interest rates. Underwriting and other expenses in the quarter were $46 million, down from $49 million in Q4 last year.
Speaker #2: The book yield on our investment portfolio was 4% at the end of the quarter. Investment income remained relatively flat, sequentially and year-over-year, as both the book yield and the size of the investment portfolio have also remained relatively flat.
Speaker #2: During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield and remained relatively flat for the year. The unrealized loss position on our portfolio narrowed again this quarter by $16 million, primarily driven by lower interest rates.
Speaker #2: Underwriting and other expenses in the quarter were $46 million, down from $49 million in the fourth quarter last year. For the full year, expenses were $201 million, down $17 million from 2024, and within the $195 to $205 million range we shared throughout the year.
Nathaniel Colson: For the full year, expenses were $201 million, down $17 million from 2024, and within the $195 to 205 million dollar range we shared throughout the year. We remain committed to disciplined expense management and ongoing operational efficiency across the organization. For 2026, we expect operating expenses to decline further to a range of $190 to 200 million dollars, due primarily to higher expected ceding commissions, as we have recently renegotiated several seasoned quota share reinsurance treaties instead of canceling those treaties. Turning to our capital management activities. Consistent with our approach over the past several years, we prioritize prudent insurance in force growth over capital return. Over the past several years, market conditions have constrained the growth of our insurance in force.
For the full year, expenses were $201 million, down $17 million from 2024, and within the $195 to 205 million dollar range we shared throughout the year. We remain committed to disciplined expense management and ongoing operational efficiency across the organization. For 2026, we expect operating expenses to decline further to a range of $190 to 200 million dollars, due primarily to higher expected ceding commissions, as we have recently renegotiated several seasoned quota share reinsurance treaties instead of canceling those treaties. Turning to our capital management activities. Consistent with our approach over the past several years, we prioritize prudent insurance in force growth over capital return. Over the past several years, market conditions have constrained the growth of our insurance in force.
Speaker #2: We remain committed to disciplined expense management and ongoing operational efficiency across the organization. For 2026, we expect operating expenses to decline further, to a range of $190 to $200 million, due primarily to higher expected seeding commissions, as we have recently renegotiated several season quarter-share reinsurance treaties instead of canceling those treaties.
Speaker #2: Turning to our capital management activities, consistent with our approach over the past several years, we prioritize prudent insurance in force growth over capital return. Over the past several years, market conditions have constrained the growth of our insurance in force.
Speaker #2: Against that backdrop, our capital return activity reflects our robust capital position, continued strong credit performance and financial results, and share price levels that we believe are attractive to generate long-term value for our shareholders.
Nathaniel Colson: Against that backdrop, our capital return activity reflects our robust capital position, continued strong credit performance and financial results, and share price levels that we believe are attractive to generate long-term value for our shareholders. In the fourth quarter, we paid a quarterly common stock dividend of $33 million and repurchased 6.8 million shares of common stock for $189 million. For the full year, we returned $915 million of capital to our shareholders through a combination of share repurchases and dividends and reduced shares outstanding by 12%. This represents a 124% payout ratio of the year's net income, and our quarterly dividend increased by 15% in the third quarter, marking 5 consecutive years of dividend growth.
Against that backdrop, our capital return activity reflects our robust capital position, continued strong credit performance and financial results, and share price levels that we believe are attractive to generate long-term value for our shareholders. In the fourth quarter, we paid a quarterly common stock dividend of $33 million and repurchased 6.8 million shares of common stock for $189 million. For the full year, we returned $915 million of capital to our shareholders through a combination of share repurchases and dividends and reduced shares outstanding by 12%. This represents a 124% payout ratio of the year's net income, and our quarterly dividend increased by 15% in the third quarter, marking 5 consecutive years of dividend growth.
Speaker #2: In the fourth quarter, we paid a quarterly common stock dividend of $33 million, and repurchased 6.8 million shares of common stock for $189 million.
Speaker #2: For the full year, we returned $915 million of capital to our shareholders through a combination of share repurchases and dividends, and reduced shares outstanding by 12%.
Speaker #2: This represents a $124% payout ratio of the year's net income, and our quarterly dividend increased by 15% in the third quarter, marking five consecutive years of dividend growth.
Speaker #2: In January, we repurchased an additional 2.7 million shares of common stock for a total of $73 million. In addition, in January, as previously announced, the board approved
Nathaniel Colson: In January, we repurchased an additional 2.7 million shares of common stock for a total of $73 million. In addition, in January, as previously announced, the board approved the quarterly common stock dividend of $0.15 per share, payable on 6 March. All of these actions were taken while continuing to strengthen our balance sheet and enhance flexibility during the year. We paid $800 million in dividends from MGIC to the holding company during the year, ending the year with $1 billion of liquidity at the holding company and an excess to PMIERs of $2.5 billion at the operating company. With that, let me turn it back over to Tim.
In January, we repurchased an additional 2.7 million shares of common stock for a total of $73 million. In addition, in January, as previously announced, the board approved the quarterly common stock dividend of $0.15 per share, payable on 6 March. All of these actions were taken while continuing to strengthen our balance sheet and enhance flexibility during the year. We paid $800 million in dividends from MGIC to the holding company during the year, ending the year with $1 billion of liquidity at the holding company and an excess to PMIERs of $2.5 billion at the operating company. With that, let me turn it back over to Tim.
Speaker #1: Quarterly common stock dividends of $0.15 per share continue to strengthen our balance sheet and enhance flexibility, while all of these actions were continuing.
Speaker #1: During the year , we paid all of these actions were taken while continuing to strengthen our balance sheet and enhance flexibility during the year .
Speaker #1: We paid $800 million in dividends from MGC to the holding company during the year, ending the year with $1 billion of liquidity at the holding company and access to PMIERs $2.5 billion at the operating company.
Timothy Mattke: Thanks, Nathan. As the founder of Mortgage Guaranty Insurance Corporation nearly 70 years ago, we strive to be the most trusted and transparent partner in the MI industry. We are proud of the critical role private MI plays in the housing finance system. We look forward to continuing to work with industry stakeholders, including the FHFA and the GSEs, to responsibly serve low down payment borrowers, expand the use of private MI, protect the taxpayers from mortgage credit risk, and help shape the future of housing finance system. With that said, housing affordability remains a challenge for many prospective home buyers. We continue to actively participate in industry discussions and support responsible policy changes that improve affordability. The passage of the Working Families Tax Cut restored the tax deductibility of MI premiums, providing meaningful tax relief to homeowners without increasing risk to the housing finance system.
Tim Mattke: Thanks, Nathan. As the founder of Mortgage Guaranty Insurance Corporation nearly 70 years ago, we strive to be the most trusted and transparent partner in the MI industry. We are proud of the critical role private MI plays in the housing finance system. We look forward to continuing to work with industry stakeholders, including the FHFA and the GSEs, to responsibly serve low down payment borrowers, expand the use of private MI, protect the taxpayers from mortgage credit risk, and help shape the future of housing finance system. With that said, housing affordability remains a challenge for many prospective home buyers. We continue to actively participate in industry discussions and support responsible policy changes that improve affordability. The passage of the Working Families Tax Cut restored the tax deductibility of MI premiums, providing meaningful tax relief to homeowners without increasing risk to the housing finance system.
Speaker #1: With that , let me turn it back over to Tim . Thanks , Nathan . As the founder of Modern Private Mortgage Insurance nearly 70 years ago , we strive to be the most trusted and transparent partner in the MI industry .
Speaker #1: We are proud of the critical role Private MI plays in the housing finance system . We look forward to continuing to work with industry stakeholders , including the Fhfa and the GSEs , to responsibly serve low down payment borrowers , expand the use of private MI , protect the taxpayers credit from mortgage risk , and help shape the future of housing finance system .
Speaker #1: With that said, housing affordability remains a challenge for many prospective homebuyers. We continue to actively participate in industry discussions and support responsible policy changes that improve affordability.
Speaker #1: The passage of the Working Families Tax Cut restored the tax deductibility of MI premiums , providing meaningful tax relief to homeowners without increasing risk to the housing finance system .
Timothy Mattke: In addition, the cost of private mortgage insurance premiums represents a temporary expense, unlike other ongoing homeownership costs, such as homeowners insurance and property taxes, which have risen significantly. Private mortgage insurance plays an important role in enabling low down payment borrowers to enter the market and achieve the American dream of homeownership sooner. In closing, we had a strong year, successfully executing our business strategies and returning meaningful capital to our shareholders. I'm confident in our talented team, our position in the market, as well as our ability to continue executing and delivering on our business strategies in 2026 and beyond, to create long-term value for all of our stakeholders. With that, Howard, let's take questions.
In addition, the cost of private mortgage insurance premiums represents a temporary expense, unlike other ongoing homeownership costs, such as homeowners insurance and property taxes, which have risen significantly. Private mortgage insurance plays an important role in enabling low down payment borrowers to enter the market and achieve the American dream of homeownership sooner. In closing, we had a strong year, successfully executing our business strategies and returning meaningful capital to our shareholders. I'm confident in our talented team, our position in the market, as well as our ability to continue executing and delivering on our business strategies in 2026 and beyond, to create long-term value for all of our stakeholders. With that, Howard, let's take questions.
Speaker #1: In addition , the cost of private mortgage insurance premiums represents a temporary expense . Unlike other ongoing homeownership costs such as homeowners insurance and property taxes , which have risen .
Speaker #1: Private insurance plays an important role in enabling low down payment borrowers to enter the market and achieve the American dream of homeownership sooner.
Speaker #1: In closing , we had a strong year successfully executing our business strategies and returning meaningful capital to our shareholders . I'm confident in our talented team , our position in the market , as well as our ability to continue executing and delivering on our business strategies in 2026 and beyond to create long term value for all of our stakeholders .
Operator: This time, please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star one one again. Again, if you have a question or comment at this time, please press star one one on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Bose George from KBW. Mr. George, your line is open.
Operator: This time, please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star one one again. Again, if you have a question or comment at this time, please press star one one on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Bose George from KBW. Mr. George, your line is open.
Speaker #1: With that, Howard, let's take questions.
Speaker #2: This time , please press star one one on your telephone keypad . If your question has been answered or you wish to remove yourself from the queue , simply press star one .
Speaker #2: One again . Again . If you have a question or comment at this time , please press star one one on your telephone keypad .
Speaker #2: Please stand by while we compile the Q&A roster. Our first from the line of beaus from George KBW. Mr. George, your line is open.
Bose George: Hey, guys, good morning. Actually, first I wanted to ask about any, you know, price competition or changes you're seeing in the industry. I mean, based on your comments, it sounds like, you know, premiums were very stable, but just wanted to confirm that.
Bose George: Hey, guys, good morning. Actually, first I wanted to ask about any, you know, price competition or changes you're seeing in the industry. I mean, based on your comments, it sounds like, you know, premiums were very stable, but just wanted to confirm that.
Speaker #3: Hey , guys . Good morning . Actually , first I wanted to ask about any price competition or changes you're seeing in the industry .
Timothy Mattke: Yeah, I think, Bose, I mean, I think, you know, we don't like to comment too much on industry pricing generally, but I think from our perspective, you know, we were able to to sort of find the value where we wanted it this quarter, similar to what we've been seeing for the majority of the year, without having, you know, major sort of adjustments in our in our premium, you know, in the quarter. So I think we feel good about that. Again, we focus on the returns ultimately and what we can get, but felt pretty good stability there, you know, looking back the last quarter.
Tim Mattke: Yeah, I think, Bose, I mean, I think, you know, we don't like to comment too much on industry pricing generally, but I think from our perspective, you know, we were able to to sort of find the value where we wanted it this quarter, similar to what we've been seeing for the majority of the year, without having, you know, major sort of adjustments in our in our premium, you know, in the quarter. So I think we feel good about that. Again, we focus on the returns ultimately and what we can get, but felt pretty good stability there, you know, looking back the last quarter.
Speaker #3: I mean, based on your comments, it sounds like premiums are very stable, but just wanted to confirm that.
Speaker #1: Yeah , I think both . I mean , I think , you know , we don't like to comment too much on industry pricing generally , but I think from our perspective , you know , we were able to to sort of find the value where we wanted it this quarter , similar to what we've been seeing for the majority of the year .
Speaker #1: Without having , you know , major sort of adjustments in our in our premium , you know , in the quarter . So I think we feel good about that .
Speaker #1: Again , we focus on the returns ultimately and what we can get . felt pretty good . But Stability there . You know , back looking back last quarter .
Bose George: Okay, great. Thanks. Then switching over to sort of regulatory stuff, you know, the market seems quite, you know, worked up about a potential reduction in FHA premiums. Have you seen anything from the FHA itself or from, you know, from the administration that suggests that is a possibility?
Bose George: Okay, great. Thanks. Then switching over to sort of regulatory stuff, you know, the market seems quite, you know, worked up about a potential reduction in FHA premiums. Have you seen anything from the FHA itself or from, you know, from the administration that suggests that is a possibility?
Speaker #1: .
Speaker #3: Okay . Great . Thanks . over switching to sort of And then regulatory stuff . The market seems quite you know potential about a reduction in worked up FHA premiums .
Speaker #3: from anything Have you the FHA itself or from , you know , from the administration that that that suggests that is a possibility ?
Timothy Mattke: You know, I always view when it comes to affordability and sort of looking at different levers, I always view it as a possibility. I don't get the sense that it's viewed as any more possible or any more work's being done specifically on it, right now than sort of making sure they understand sort of the different levers that can be pulled. So again, it's really tough to sort of try to put odds on it, other than I would say that I don't get the sense that there is any, you know, increasing sort of discussion of people we've talked with about it, other than I think whenever you look at affordability, we know that certain constituencies will advocate for reducing the FHA premium, and that always creates external pressure. But haven't seen anything just to believe that that is imminent.
Tim Mattke: You know, I always view when it comes to affordability and sort of looking at different levers, I always view it as a possibility. I don't get the sense that it's viewed as any more possible or any more work's being done specifically on it, right now than sort of making sure they understand sort of the different levers that can be pulled. So again, it's really tough to sort of try to put odds on it, other than I would say that I don't get the sense that there is any, you know, increasing sort of discussion of people we've talked with about it, other than I think whenever you look at affordability, we know that certain constituencies will advocate for reducing the FHA premium, and that always creates external pressure. But haven't seen anything just to believe that that is imminent.
Speaker #1: You know , I always view when when it comes to affordability and sort of looking at different levers , I always view a possibility .
Speaker #1: It is, I don't get the sense that it's viewed as any more possible or that any more work is being done specifically on it right now, than sort of making sure they understand the different levers that can be pulled.
Speaker #1: So again , it's really tough to to sort of try to put odds on it other than I would say that I the sense that there is any , you know don't get , increasing sort of discussion of people we've talked with about it other than I think whenever you look at affordability , we know that certain constituencies will advocate for reducing the FHA premium , and that always creates external pressure .
Timothy Mattke: But that can change quickly in this world, right?
But that can change quickly in this world, right?
Bose George: Okay, great. Thanks.
Bose George: Okay, great. Thanks.
Speaker #1: But I haven't seen anything just to believe that that is imminent . But that can quickly in this world . change Right ?
Operator: Thank you. Our next question or comment comes from the line of Terry Ma from Barclays. Mr. Ma, your line is open. Mr. Ma, you may be muted.
Operator: Thank you. Our next question or comment comes from the line of Terry Ma from Barclays. Mr. Ma, your line is open. Mr. Ma, you may be muted.
Speaker #3: Great . Thanks Okay .
Speaker #2: Thank
Speaker #2: question Our next you . . or comment comes from the line of Terry Ma from Barclays . Mr. line is Ma , your open .
Nathaniel Colson: Hey, yes, sorry, I was muted. Good morning. Thank you. Hey, I was interested to see if you could provide kind of any color on kind of credit trends, that you're seeing kind of by region or state.
Terry Ma: Hey, yes, sorry, I was muted. Good morning. Thank you. Hey, I was interested to see if you could provide kind of any color on kind of credit trends, that you're seeing kind of by region or state.
Speaker #2: Ma , you Mr. may be muted .
Speaker #4: Yes ? Sorry , I was muted . Hey . Good morning . Thank you . I was interested to see if you could provide kind any color on kind of credit trends that you're seeing kind of by region or state .
Timothy Mattke: Hey, Terry, it's Nathan. I'll, I'll take that one. You know, we do look at the mix of new delinquencies that we're seeing on a monthly basis and, and really haven't seen much in the way of movement on a geographic basis, whether it be state or even at the market level. You know, I, I think when, when we look at the mix of new notices from, you know, the first quarter, the second quarter, the third quarter compared to the fourth-
Nathan Colson: Hey, Terry, it's Nathan. I'll, I'll take that one. You know, we do look at the mix of new delinquencies that we're seeing on a monthly basis and, and really haven't seen much in the way of movement on a geographic basis, whether it be state or even at the market level. You know, I, I think when, when we look at the mix of new notices from, you know, the first quarter, the second quarter, the third quarter compared to the fourth-
Speaker #1: Terry, it's Nathan. I'll take that one.
Speaker #3: know . You
Speaker #1: We do look at the mix of new delinquencies that we're seeing on a monthly basis . And really haven't seen much in the way of movement on a geographic basis , whether it be state or even at the market level .
Giuliano Bologna: ... you know, not seeing states that are really standing out, one way or the other. I think there's always some noise, especially with the relatively low level of new notices that we have. You know, some of the jurisdictions have relatively small numbers, so it can be a little bit noisier. But as a kind of percent of the total, really not seeing areas that are standing out or areas of concern for us right now.
... you know, not seeing states that are really standing out, one way or the other. I think there's always some noise, especially with the relatively low level of new notices that we have. You know, some of the jurisdictions have relatively small numbers, so it can be a little bit noisier. But as a kind of percent of the total, really not seeing areas that are standing out or areas of concern for us right now.
Speaker #1: You know , I think when we look at the mix of notices new from , you know , the first quarter , the second quarter , the third quarter compared to the fourth , you know , not seeing states that are really standing out one way or the other .
Speaker #1: think there's I there's always some noise , especially with the relatively low level of new notices that we have , you know , some of the jurisdictions have relatively small numbers .
Speaker #1: It can be a little bit noisier. But as a kind of percent of the total, I'm really not seeing areas that are standing out or areas of concern for us right now.
Terry Ma: Got it. That's helpful. And then on the reserve release, Nicole, I appreciate the color and kind of makeup. But can you maybe just kind of remind us how that compares to the makeup, or the drivers that release, that you had in the last, you know, few quarters? I know not a great way to look at it, but at least the magnitude of the release was noticeably lower than what you saw the last few quarters.
Terry Ma: Got it. That's helpful. And then on the reserve release, Nicole, I appreciate the color and kind of makeup. But can you maybe just kind of remind us how that compares to the makeup, or the drivers that release, that you had in the last, you know, few quarters? I know not a great way to look at it, but at least the magnitude of the release was noticeably lower than what you saw the last few quarters.
Speaker #4: That's helpful. And then on the reserve release in the quarter, appreciate the color on the kind of makeup you gave, but can you just kind of remind us how that compares to the makeup or the drivers of that release that you've had in the last few quarters?
Speaker #4: I know , not a great way to look at it , but at least the magnitude of the release was noticeably lower than what you saw the last few quarters .
Nathaniel Colson: Yeah. Terry, it's Nathan again. I think the way that we've approached reserving and the way that then the reserve releases have kind of mechanically worked is unchanged. You know, we're always comparing our initial estimates to, you know, what we now think is our best estimate. You know, in our business, cures come earlier than claims, so early cures don't give you as much new information about ultimate losses. So, you know, from what we're seeing, you know, a couple of quarters ago, we would have seen reserve development coming out of maybe notices that we had received two, three, four, five quarters before. And it kind of keeps moving forward as time advances.
Nathan Colson: Yeah. Terry, it's Nathan again. I think the way that we've approached reserving and the way that then the reserve releases have kind of mechanically worked is unchanged. You know, we're always comparing our initial estimates to, you know, what we now think is our best estimate. You know, in our business, cures come earlier than claims, so early cures don't give you as much new information about ultimate losses. So, you know, from what we're seeing, you know, a couple of quarters ago, we would have seen reserve development coming out of maybe notices that we had received two, three, four, five quarters before. And it kind of keeps moving forward as time advances.
Speaker #1: Yeah , Nathan , again , I think the way that we've approached reserving and the way that that then the , the reserve releases have kind of mechanically worked is unchanged .
Speaker #1: You know , we're we're always comparing our initial estimates to what we now think is the best You know , in our estimate .
Speaker #1: business cures come earlier than claims . So early cures don't give you as much new information about losses . So you know , from what we're seeing , ultimate a couple quarters ago , we would have seen reserve development coming out of maybe notices that we had received two , three , 4 or 5 quarters before .
Nathaniel Colson: So, I would say, you know, the quarters where development is coming from are different, but mostly because, you know, we're just further in time. So we had development, say, on the notices from the first half of 2025, but we wouldn't have had that, you know, say, in Q2, but it would have been from the back half of 2024, you know, those notices that had been aged for two or three quarters. So, that's not a kind of a rule or anything for us. It's really looking at how many are curing, what is the monthly pace and quarterly pace at which they're curing, how closely are they following previously identified trends and cure activity, and really, where do we think it will ultimately play out?
So, I would say, you know, the quarters where development is coming from are different, but mostly because, you know, we're just further in time. So we had development, say, on the notices from the first half of 2025, but we wouldn't have had that, you know, say, in Q2, but it would have been from the back half of 2024, you know, those notices that had been aged for two or three quarters. So, that's not a kind of a rule or anything for us. It's really looking at how many are curing, what is the monthly pace and quarterly pace at which they're curing, how closely are they following previously identified trends and cure activity, and really, where do we think it will ultimately play out?
Speaker #1: And it's kind of keeps moving forward as time So I advances . would say , you know , the quarters where development is coming from are different , but mostly because , you know , we're just further in time .
Speaker #1: So we . Had development say on the notices first half of 2025 . We wouldn't have had that , you know , say in Q2 .
Speaker #1: But it would have been from the back half of '24. You know, those notices that had been aged for two or three quarters.
Speaker #1: So and that's not that's not a kind of a rule or anything for us . It's really looking at how many are curing what is the pace monthly and quarterly curing at which pace they're .
Nathaniel Colson: Continue to be reestimating down new notice quarters from our initial estimates of 7.5%, you know, down into the lower single digits.
Speaker #1: How closely are they following previously identified trends in cure activity? And really, where do we think it will ultimately play out?
Continue to be reestimating down new notice quarters from our initial estimates of 7.5%, you know, down into the lower single digits.
Speaker #1: And continue to be re estimating down new notice quarters from our initial estimates of 7.5% down into the lower single digits .
Terry Ma: Got it. That's, that's helpful. Thank you.
Terry Ma: Got it. That's, that's helpful. Thank you.
Nathaniel Colson: Thank you.
Nathan Colson: Thank you.
Operator: Thank you. Our next question or comment comes from the line of Douglas Harter from UBS. Mr. Harter, your line is now open.
Operator: Thank you. Our next question or comment comes from the line of Douglas Harter from UBS. Mr. Harter, your line is now open.
Speaker #4: Got it. That's helpful. Thank you.
Speaker #1: Thank you .
Speaker #2: Thank you. Our next question or comment comes from the line of Doug Harter from UBS. Mr. Harter, your line is now open.
Douglas Harter: Thanks. I guess along those lines of the last question, can you just talk about the composition of the NODs and kind of what vintages those are coming from, and, you know, kind of as we get to the newer vintages with less HPA, how you think that might impact cures?
Doug Harter: Thanks. I guess along those lines of the last question, can you just talk about the composition of the NODs and kind of what vintages those are coming from, and, you know, kind of as we get to the newer vintages with less HPA, how you think that might impact cures?
Speaker #5: Thanks . I guess along those lines of the last question , can you just talk about the the composition of the nods and kind of what vintages those are coming from ?
Speaker #5: And kind of as we get to the newer vintages with less HPA , how do you think that might impact cures ?
Nathaniel Colson: Yeah, Doug, it's Nathan. I think on the cures side, you know, really haven't seen a lot of divergence in cure activity based on vintage. I think, you know, perhaps the 2022 vintage is at the lower end of the range as we would look at cure rates by vintage for delinquent loans. But still, all within, I'd say, a pretty tight band, and much better than pre-COVID levels. You know, the long-term cure rates are really what are driving the ultimate reductions in our ultimate loss expectations. So, yeah, I think not seeing much on the cure rate side. On the delinquency emergence, you know, we have got a couple tables and charts in the supplement.
Nathan Colson: Yeah, Doug, it's Nathan. I think on the cures side, you know, really haven't seen a lot of divergence in cure activity based on vintage. I think, you know, perhaps the 2022 vintage is at the lower end of the range as we would look at cure rates by vintage for delinquent loans. But still, all within, I'd say, a pretty tight band, and much better than pre-COVID levels. You know, the long-term cure rates are really what are driving the ultimate reductions in our ultimate loss expectations. So, yeah, I think not seeing much on the cure rate side. On the delinquency emergence, you know, we have got a couple tables and charts in the supplement.
Speaker #1: Yeah , I the on think side , you know , really haven't seen a lot of of divergence in cure activity based on vintage .
Speaker #1: I think , you know , perhaps the 2022 vintage is at the lower end of , of the , the range , as we would look at cure rates by vintage for , for delinquent loans , but still all within , I'd say a pretty tight band and and much better than pre-COVID levels .
Speaker #1: You know , the long term cure rates are really what are driving the ultimate reductions in our ultimate loss expectations . So I think not seeing much on the cure rate side on the delinquency emergence , you know , we have got a couple , you know , tables and charts in , in the supplement .
Nathaniel Colson: You know, one of them does look at delinquency rates over time by vintage. And you can see, you know, 2022 is running modestly higher than 2021 or 2020 or even 2019. But the recent vintages are all tracking very close to that or inside of that. So again, I think this is all consistent in our mind with the normalization in credit conditions coming off of, you know, kind of early post-COVID conditions that just led to, you know, very, very low losses for those vintages.
You know, one of them does look at delinquency rates over time by vintage. And you can see, you know, 2022 is running modestly higher than 2021 or 2020 or even 2019. But the recent vintages are all tracking very close to that or inside of that. So again, I think this is all consistent in our mind with the normalization in credit conditions coming off of, you know, kind of early post-COVID conditions that just led to, you know, very, very low losses for those vintages.
Speaker #1: You know , one of them does look at delinquency rates over time by vintage . can see , 2022 is is running than , higher modestly than 21 or 20 or even 2019 .
Speaker #1: But the recent vintages are all tracking very close to or that inside of that . So again , I think this is all consistent in our mind with the normalization in credit coming conditions off of , you know , kind of early post-Covid conditions that just led to very , very low losses for those vintages .
Douglas Harter: Great. Appreciate it. Thank you.
Doug Harter: Great. Appreciate it. Thank you.
Operator: Thank you. Our next question or comment comes from the line of Giuliano Bologna from Compass. Mr. Bologna, your line is open.
Operator: Thank you. Our next question or comment comes from the line of Giuliano Bologna from Compass. Mr. Bologna, your line is open.
Speaker #2: Thank you . Our next question or comment comes from the line of Giuliano from compass . Mr. Bologna , your line is Bologna open .
Giuliano Bologna: Yeah, congrats on the continued execution and especially on the expense management side. When I look forward to next year, obviously, you know, you put out the $190 to 200 range for underwriting and operating expenses. I'd be curious, you know, especially looking at this environment, you know, are there any other levers that you could pull to kind of improve, you know, returns on capital, at least in the near term? I realize the environment's relatively tough when insurance in force, you know, is barely growing or expected to be roughly flat. I'm curious, what other levers you might have, you know, that you could pull to, you know, push some incremental margin at this point?
Giuliano Bologna: Yeah, congrats on the continued execution and especially on the expense management side. When I look forward to next year, obviously, you know, you put out the $190 to 200 range for underwriting and operating expenses. I'd be curious, you know, especially looking at this environment, you know, are there any other levers that you could pull to kind of improve, you know, returns on capital, at least in the near term? I realize the environment's relatively tough when insurance in force, you know, is barely growing or expected to be roughly flat. I'm curious, what other levers you might have, you know, that you could pull to, you know, push some incremental margin at this point?
Speaker #5: Yeah . Congrats on new execution and especially on the expense management side . When I look forward to next year , obviously you put out the 190 to 200 range for underwriting and expenses .
Speaker #5: I'd be curious , especially looking at this environment . You know , are other levers that you could to pull improve capital , at least in the near term ?
Speaker #5: I realize returns on the environment are relatively tough when insurance enforces, you know, is barely growing or expected to be roughly flat.
Speaker #5: I'm curious what other levers you might have . You know , that you could pull to push somebody . Rental margin . At this point .
Nathaniel Colson: Yeah, it's Nathan. I'll get started on this. I think the biggest thing that we've done this year, really in anticipation of a normalization in credit conditions and the movement away from, you know, what has been close to zero losses for the last couple of years, is really getting the reinsurance program, you know, really bolstered with really attractive costs on our in-force book, but increasingly covering our future new business. You know, 2026 and 2027 NIW is now covered. And, you know, when you think about return on capital, we often think about that as return on PMIER's capital. And, you know, the reinsurance at the cost that we're able to procure it does provide us, you know, better returns on equity than we earn on a return on capital basis.
Nathan Colson: Yeah, it's Nathan. I'll get started on this. I think the biggest thing that we've done this year, really in anticipation of a normalization in credit conditions and the movement away from, you know, what has been close to zero losses for the last couple of years, is really getting the reinsurance program, you know, really bolstered with really attractive costs on our in-force book, but increasingly covering our future new business. You know, 2026 and 2027 NIW is now covered. And, you know, when you think about return on capital, we often think about that as return on PMIER's capital. And, you know, the reinsurance at the cost that we're able to procure it does provide us, you know, better returns on equity than we earn on a return on capital basis.
Speaker #1: As Nathan , I'll get started on , I think the biggest thing that that we've done this year really in anticipation of a normalization in credit conditions and the movement away from what has been close to zero losses for the last couple of years is really getting the reinsurance program , you know , really bolstered with really attractive costs on on our In-force book .
Speaker #1: But increasingly covering our future new business , you know , 2026 and 2027 . And Iwu is now . And , you know , when you think about covered return on capital , we about that as return on Pmiers often think capital .
Speaker #1: And the reinsurance cost that we're able to procure, at the end of the day, does provide us returns on better equity than we earn on a return on capital basis.
Nathaniel Colson: And that's why I think capital management for us is so important. And it's not just the capital return side of it, it's also, you know, how we're constructing, you know, our capital balance sheet for, you know, our regulatory capital measures, our risk-based capital measures, rating agencies, and the like. And increasingly, you know, that has taken on, you know, an even heavier reinsurance lean, partly because of the attractiveness of that market and the tail risk protection that it provides. But, you know, partly because we do think that that is the best way to continue to earn kind of good risk-adjusted returns on equity.
And that's why I think capital management for us is so important. And it's not just the capital return side of it, it's also, you know, how we're constructing, you know, our capital balance sheet for, you know, our regulatory capital measures, our risk-based capital measures, rating agencies, and the like. And increasingly, you know, that has taken on, you know, an even heavier reinsurance lean, partly because of the attractiveness of that market and the tail risk protection that it provides. But, you know, partly because we do think that that is the best way to continue to earn kind of good risk-adjusted returns on equity.
Speaker #1: And that's why I think capital management for us is so important. And it's not just the capital return side of it; also how we're constructing our capital balance sheet for our regulatory capital measures.
Speaker #1: Our risk based capital agencies measures , rating and the like . And increasingly , that has taken on , you an even heavier reinsurance partly because lean , of the attractiveness of that market .
Speaker #1: And the tail risk protection that it provides . But , you know , partly because we do think that that is the the best way to earn continue , continue , to earn kind of good risk adjusted returns on equity .
Giuliano Bologna: That's very helpful. And then, you know, maybe this partially addressed, but, you know, obviously during, you know, during the pickup and refinancing activity and kind of the expected continuation of that, you know, it's somewhat disproportionately impacting, you know, or sort of disproportionately impact your high WAC, WAC coupons that you have out there. I'm curious, is there a big divergence in the premium rates between, you know, some of your COVID-era, lower WAC, lower WAC, insurance in force, versus, you know, some of the more recent vintages that seem to be, they're being much more exposed to, you know, refinance activity at the moment? And, you know, should that impact your average premium rate, you know, throughout the year?
Giuliano Bologna: That's very helpful. And then, you know, maybe this partially addressed, but, you know, obviously during, you know, during the pickup and refinancing activity and kind of the expected continuation of that, you know, it's somewhat disproportionately impacting, you know, or sort of disproportionately impact your high WAC, WAC coupons that you have out there. I'm curious, is there a big divergence in the premium rates between, you know, some of your COVID-era, lower WAC, lower WAC, insurance in force, versus, you know, some of the more recent vintages that seem to be, they're being much more exposed to, you know, refinance activity at the moment? And, you know, should that impact your average premium rate, you know, throughout the year?
Speaker #5: very helpful . That's And then , you know , maybe partially addressed , but , just you know , obviously during , you know , during the pickup and refinancing activity and kind of the expected continuation of that , you know , it's somewhat disproportionately impacting , you or affect your higher disproportionately coupons have out there .
Speaker #5: I'm is there a divergence big curious , is in the premium rates between some of your there any Covid or lower WACC insurance and forest versus , you know , some of the more recent ventures that seem to be there being more , more exposed to much refinance activity at the moment .
Nathaniel Colson: Yes, it's an interesting question. Premium rates on average have been relatively flat for the last, you know, 5 or 6 years. You know, and you can see that in our in-force premium yield. The really low coupon books that we wrote in 2020 and 2021 had, you know, much lower credit risk at origination characteristics. So all else equal, they would have had lower premium rates. There was a lot of refinance activity in those books. Whereas the more recent higher coupon books have been purchase-dominated, you know, higher LTV, still really good credit profile, especially from a credit score perspective.
Nathan Colson: Yes, it's an interesting question. Premium rates on average have been relatively flat for the last, you know, 5 or 6 years. You know, and you can see that in our in-force premium yield. The really low coupon books that we wrote in 2020 and 2021 had, you know, much lower credit risk at origination characteristics. So all else equal, they would have had lower premium rates. There was a lot of refinance activity in those books. Whereas the more recent higher coupon books have been purchase-dominated, you know, higher LTV, still really good credit profile, especially from a credit score perspective.
Speaker #5: And, you know, should that impact your average premium rate throughout the year?
Speaker #1: Yeah , it's an interesting question . I I don't premium on rates average have been flat for the relatively last . You know , 5 or 6 years .
Speaker #1: You know , you can see that in our In-force premium yield . The really low coupon books that we wrote in 2020 and 2021 had a much risk credit at lower origination characteristics .
Speaker #1: So, all else equal, they would have had lower premium rates. There's a lot of refinance activity in those books, whereas the more recent, higher coupon books have been purchased, dominated by higher LTV.
Nathaniel Colson: But, I think, you know, it's less about maybe the vintage effect and more if we're already insuring a loan, if that refis into something that has a lower capital charge and lower, you know, kind of at origination credit characteristics, you know, all else equal, we get lower premium for that loan in a risk-based pricing market.
But, I think, you know, it's less about maybe the vintage effect and more if we're already insuring a loan, if that refis into something that has a lower capital charge and lower, you know, kind of at origination credit characteristics, you know, all else equal, we get lower premium for that loan in a risk-based pricing market.
Speaker #1: really good Still credit especially from a credit score profile , But perspective . I don't . I don't think that I you think , less about maybe the vintage effect and more if we're already insuring a loan .
Speaker #1: that If refi is into that something has a lower capital charge and lower kind of ad origination credit characteristics , you know , all else equal , we'll get lower premium for that loan in a in a risk based pricing market .
Giuliano Bologna: That's very helpful. I appreciate it, and I will jump back in the queue.
Giuliano Bologna: That's very helpful. I appreciate it, and I will jump back in the queue.
Nathaniel Colson: Thank you.
Nathan Colson: Thank you.
Operator: Thank you. Our next question or comment comes from the line of Mihir Bhatia from Bank of America. Your line is now open.
Operator: Thank you. Our next question or comment comes from the line of Mihir Bhatia from Bank of America. Your line is now open.
Speaker #5: That's very helpful . I appreciate that . And I will jump back in the Q .
Speaker #1: Thank you .
Mihir Bhatia: Good morning. Thank you for taking my questions. The first one I wanted to ask was just about in-force premium yield. It declined a touch this quarter after being steady for most of 25. What drove that?
Mihir Bhatia: Good morning. Thank you for taking my questions. The first one I wanted to ask was just about in-force premium yield. It declined a touch this quarter after being steady for most of 25. What drove that?
Speaker #2: Thank you. Our next question or comment comes from the line of Mihir Bhatia from Bank of America. Your line is now open.
Speaker #6: Good morning . Thank you for taking my questions . First one I wanted to ask was just about In-force premium yield . It declined a touch this quarter after being steady for most of 25 .
Nathaniel Colson: Yeah, Mihir, it's Nathan. You know, it was down 0.2 basis points, and I think, you know, that's just, I think for us, within the margin of flat, it does fluctuate a little bit. I think, you know, we wrote more business in Q4 than we would have otherwise anticipated due to refinance activity. So that increases the ending in-force, but it doesn't add to premium because we don't collect premium in the, you know, often in the first month. It's really, you know, starts in the second month. So I think you're dealing with, you know, some really situations like that versus there being, you know, any substantive change in the mix of the in-force or the, you know, premium dollars on a direct basis were up.
Nathan Colson: Yeah, Mihir, it's Nathan. You know, it was down 0.2 basis points, and I think, you know, that's just, I think for us, within the margin of flat, it does fluctuate a little bit. I think, you know, we wrote more business in Q4 than we would have otherwise anticipated due to refinance activity. So that increases the ending in-force, but it doesn't add to premium because we don't collect premium in the, you know, often in the first month. It's really, you know, starts in the second month. So I think you're dealing with, you know, some really situations like that versus there being, you know, any substantive change in the mix of the in-force or the, you know, premium dollars on a direct basis were up.
Speaker #6: What drove that ?
Speaker #1: here Yeah , know it it's was Nathan . You down a couple tenths a basis point . And of I that's for think you know I think just us , you the within know margin of flat , it does fluctuate a little bit .
Speaker #1: I think , you know , we wrote more business in Q4 than we would have otherwise anticipated due to refinance activity . So that increases the the ending it in-force .
Speaker #1: But that adds to it, because we don't often collect premium in the first month. It really starts in the second month.
Speaker #1: So I think you're dealing with , you know , some some really situations like that versus there being any substantive change in , in the mix of the or the in-force premium dollars on direct a So I up .
Nathaniel Colson: So I think it probably has more to do with the insurance in force dollars going up at the end such that the average is a little bit higher and drove the yield lower. But again-
So I think it probably has more to do with the insurance in force dollars going up at the end such that the average is a little bit higher and drove the yield lower. But again-
Speaker #1: I think it probably has more to do with the insurance in-force dollars going up at the end, such that the average is a little bit higher and drove the yield lower.
Mihir Bhatia: Okay.
Nathaniel Colson: - Those things, often it will normalize over more than a quarter.
Mihir Bhatia: Okay.
Nathan Colson: - Those things, often it will normalize over more than a quarter.
Mihir Bhatia: Got it. And then the, I guess, somewhat related, but in your prepared remarks, you talked about insurance in-force staying flat, even if you-- even if the market ends up being a little bigger because you think you'll have a, maybe a giveback, if you will, on persistency. That didn't happen this quarter. So I guess, maybe just talk a little bit about that. Why, why do you think it would happen, at least early on in the early stages of, you know, a rate cut potentially or a larger market? Like, just given it didn't happen in fourth quarter where you wrote more in NIW, but persistency stayed pretty high.
Mihir Bhatia: Got it. And then the, I guess, somewhat related, but in your prepared remarks, you talked about insurance in-force staying flat, even if you-- even if the market ends up being a little bigger because you think you'll have a, maybe a giveback, if you will, on persistency. That didn't happen this quarter. So I guess, maybe just talk a little bit about that. Why, why do you think it would happen, at least early on in the early stages of, you know, a rate cut potentially or a larger market? Like, just given it didn't happen in fourth quarter where you wrote more in NIW, but persistency stayed pretty high.
Speaker #1: But again, those things often will normalize over more than a quarter.
Speaker #6: it . Got And I guess But in your prepared remarks , you about somewhat related . talked then insurance flat , even enforcing if you even if the market ends up being a little bigger because you think you'll have a maybe a giveback if you will , on persistency .
Speaker #6: That happen this didn't quarter . So I guess maybe just talk a little bit about that . Why do you think it would happen at least early on in the early stages of , you know , a rate cut potentially , or a market ?
Timothy Mattke: Yeah, I think, Mihir, it's Tim. I think it's all within sort of a range of outcomes. I think what we want to make sure that we are clear about is that when refi activity normally it's going to be a time refi that happens from MI into MI, and that there's going to be downward pressure on persistency. And so it just, if there's more NIW volume, it doesn't just inure to sort of a total increase in insurance in force. So yeah, it, we did have a slight increase this quarter, good call, with an increase in sort of refi activity, pretty substantial increase in refi activity. But it's a very, I'd say, marginal sort of increase in our insurance in force.
Tim Mattke: Yeah, I think, Mihir, it's Tim. I think it's all within sort of a range of outcomes. I think what we want to make sure that we are clear about is that when refi activity normally it's going to be a time refi that happens from MI into MI, and that there's going to be downward pressure on persistency. And so it just, if there's more NIW volume, it doesn't just inure to sort of a total increase in insurance in force. So yeah, it, we did have a slight increase this quarter, good call, with an increase in sort of refi activity, pretty substantial increase in refi activity. But it's a very, I'd say, marginal sort of increase in our insurance in force.
Speaker #6: Larger, just given it didn't happen in fourth quarter, where you wrote more and, but persistency stayed pretty high.
Speaker #7: think Yeah , I it's it's I think it's Tim . all within sort of a range of outcomes . I think what we what we want to make sure that are clear about we is that when refi activity normally it's going to be times refi that happens from into MI MI .
Speaker #7: And that there's going to be downward pressure on persistency. And so, if there's new insurance written (NIW) volume, it doesn't just go to a sort of total increase in force.
Speaker #7: insurance in So yeah , we did have a slight increase this quarter . To call it with a increase in sort of with an refi activity .
Timothy Mattke: And so I think just trying to make sure we temper the expectations appropriately, that even if interest rates fall and the majority of the pickup in volume is from refi activity, that that has downward pressure on persistency.
And so I think just trying to make sure we temper the expectations appropriately, that even if interest rates fall and the majority of the pickup in volume is from refi activity, that that has downward pressure on persistency.
Speaker #7: Pretty increased substantial refi But activity . it was a very I'd say of increase marginal sort in insurance in force . And so I think just trying to make temper the sure appropriately that even if interest rates fall in the majority of the pick up in is volume from refi activity , that that has downward pressure on persistency .
Mihir Bhatia: Got it. And then maybe just, I'll just wrap with this one. Just in terms of credit trends from here, anything we should be keeping in mind as we think about default rate, as we look at 2026 and 2027? Just from a, even from a vintage size perspective, are we through the peak years for the last vintages? Does vintage size maybe become a bit of a good guy for DQ rate from here, given persistency is staying elevated? Just any thoughts there on the default rate? Thanks.
Mihir Bhatia: Got it. And then maybe just, I'll just wrap with this one. Just in terms of credit trends from here, anything we should be keeping in mind as we think about default rate, as we look at 2026 and 2027? Just from a, even from a vintage size perspective, are we through the peak years for the last vintages? Does vintage size maybe become a bit of a good guy for DQ rate from here, given persistency is staying elevated? Just any thoughts there on the default rate? Thanks.
Speaker #7: .
Speaker #6: Got it . And then maybe just I'll with just wrap up this one , just in credit trends terms of from here , anything we should be mind as we about keeping in think default rate , as we look at 26 and 27 , just from a even from a vintage size perspective .
Speaker #6: Are we through the peak years for the last vintages ? Does vintage size maybe become a bit of a good guy for dick rate from here , given persistency , staying elevated any ?
Nathaniel Colson: Yeah, Mihir, it's Nathan. I think that's possible. You know, our expectations now are for a pretty similarly sized market. And with, you know, home price appreciation being relatively modest, the dollar growth that we've enjoyed in certain years, even if the units weren't growing as much, we don't think we'll be as strong. So, it does feel like we're off of the lows, though, in terms of the new business that we wrote, say, in 2023 or 2024.
Nathan Colson: Yeah, Mihir, it's Nathan. I think that's possible. You know, our expectations now are for a pretty similarly sized market. And with, you know, home price appreciation being relatively modest, the dollar growth that we've enjoyed in certain years, even if the units weren't growing as much, we don't think we'll be as strong. So, it does feel like we're off of the lows, though, in terms of the new business that we wrote, say, in 2023 or 2024.
Speaker #6: Thoughts there around the default, just rate? Thanks.
Speaker #1: Nathan , I think that's possible . You know , our expectations now are for a pretty sized market similarly with . And price home relatively appreciation being modest , the dollar growth that we've enjoyed in certain years , even if the weren't growing units as much , think we'll we don't be as strong .
Speaker #1: So it does feel like we're off of the lows , though , in terms of the the new business that we wrote , say , in 23 or 24 , and it also feels like there's maybe more upside risk to ne.w than downside at this to given point , the given the refi volume , we saw when when rates , went directionally lower but not , you know , that much lower just into low the 60s generated a lot of refi activity .
Bose George: Mm-hmm.
Mihir Bhatia: Mm-hmm.
Nathaniel Colson: It also feels like there's maybe more upside risk to NIW than downside at this point, given the refi volume we saw when rates, you know, went directionally lower, but not, you know, that much lower, just into the low sixes, generated a lot of refi activity. So, that could definitely become something that is a benefit to the in-force delinquency rate. But I think as we're seeing it today, you know, the next couple of vintages are maybe modestly higher, so any impact like that would be relatively modest.
Nathan Colson: It also feels like there's maybe more upside risk to NIW than downside at this point, given the refi volume we saw when rates, you know, went directionally lower, but not, you know, that much lower, just into the low sixes, generated a lot of refi activity. So, that could definitely become something that is a benefit to the in-force delinquency rate. But I think as we're seeing it today, you know, the next couple of vintages are maybe modestly higher, so any impact like that would be relatively modest.
Speaker #1: So that could become it could definitely become something that that is a benefit to the In-force delinquency rate . But I think as we're seeing it today , you know , the next couple of vintages are maybe any modestly higher .
Bose George: Got it. Thank you. Thank you for taking my questions.
Mihir Bhatia: Got it. Thank you. Thank you for taking my questions.
Speaker #1: So impact like that would be relatively .
Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to. I'm sorry, we do have a follow-up question from Mr. Bose George from KBW. Mr. George, your line is open.
Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to. I'm sorry, we do have a follow-up question from Mr. Bose George from KBW. Mr. George, your line is open.
Speaker #1: modest Got
Speaker #6: you . Thank you it . Thank for taking questions my .
Speaker #2: you . Thank I'm showing no additional questions in the queue at this time . I'd like to . I'm sorry . We have the follow up question from Mr. Boz George from KBW .
Bose George: Hey, guys. Thanks for the follow-up. Actually, for modeling the ceded premium number, going forward, like, what's a good run rate for that? The impact on the premium.
Bose George: Hey, guys. Thanks for the follow-up. Actually, for modeling the ceded premium number, going forward, like, what's a good run rate for that? The impact on the premium.
Speaker #2: Mr. George, a line is open.
Speaker #3: Hey , guys . Thanks for the follow up . Actually , for the for modeling the the seeded premium number going forward . Like , what's a good run rate for that ?
Nathaniel Colson: I think many of the lines for ceded premium, and we have this in our earnings release in the supplement. I think the challenging one to model is the profit commission on the quota share deals, because as we have higher losses, we're ceding those losses to the quota share deals, but then earning less profit commission.
Nathan Colson: I think many of the lines for ceded premium, and we have this in our earnings release in the supplement. I think the challenging one to model is the profit commission on the quota share deals, because as we have higher losses, we're ceding those losses to the quota share deals, but then earning less profit commission.
Speaker #3: The impact on the premium
Speaker #1: think I many
Speaker #1: Of the lines for premium, and we have this in our earnings, in our release, in the supplement. I think the challenging one to model is the profit commission on the quarter share deals.
Bose George: Mm.
Bose George: Mm.
Speaker #1: Because as we have higher losses , we're seeding those losses to the quarter share deals . But then earning less profit commission . So the answer to that is , is quite a question bit dependent on your expectations around future losses .
Nathaniel Colson: So the answer to that question is quite a bit dependent on your expectations around future losses, and that's something that we haven't given guidance on, and don't intend to going forward, just because the nature of our business and the potential variability there. But, if it'd be helpful to work through the mechanics of the profit commission, happy to follow up offline, too.
Nathan Colson: So the answer to that question is quite a bit dependent on your expectations around future losses, and that's something that we haven't given guidance on, and don't intend to going forward, just because the nature of our business and the potential variability there. But, if it'd be helpful to work through the mechanics of the profit commission, happy to follow up offline, too.
Speaker #1: And that's something that we haven't haven't given guidance on . intend to going forward . Just because the nature of our And don't business and the variability potential there .
Bose George: Okay. And just to understand, so the increase in the ceded premiums this quarter, you know, was a reflection of that, was a reflection of a change in the profit commission? Is that right?
Bose George: Okay. And just to understand, so the increase in the ceded premiums this quarter, you know, was a reflection of that, was a reflection of a change in the profit commission? Is that right?
Speaker #1: But if it'd be helpful to to work through the mechanics of the Profit Commission , happy to follow up offline to .
Speaker #3: . And just to Okay understand , so the increase in the seeded premiums this quarter was a reflection of that . Was it reflection of a change in the the Profit Commission ?
Nathaniel Colson: That's largely the case. You know, the profit commission was down about $4 million sequentially. And that's really because we ceded additional losses under the quota share agreements. So you know, we're, from a net cost perspective, it doesn't have an impact. We're getting it back on the loss line.
Nathan Colson: That's largely the case. You know, the profit commission was down about $4 million sequentially. And that's really because we ceded additional losses under the quota share agreements. So you know, we're, from a net cost perspective, it doesn't have an impact. We're getting it back on the loss line.
Speaker #3: Is that right ?
Speaker #1: that's that's That's largely the case . You know , the Profit Commission was down about $4 million sequentially . And that's really because we seeded additional losses under the quarter share agreement .
Speaker #1: So , you know , we're from a net cost perspective . It doesn't have an impact . We're getting it back on on the loss .
Speaker #1: So , you know , we're from a net cost perspective . It doesn't have an impact . We're getting it back on on the loss . line it does But impact line .
Bose George: Okay.
Bose George: Okay.
Nathaniel Colson: But it does impact the premium line. So, and we do have the profit commission broken out separately, for each quarter, so you can see that. But it was down, like I said, about $4 million in the quarter.
Nathan Colson: But it does impact the premium line. So, and we do have the profit commission broken out separately, for each quarter, so you can see that. But it was down, like I said, about $4 million in the quarter.
Speaker #1: So and we do have premium commission profit the broken out separately for each quarter . So you can you can see that . But it was down like about $4 million in the quarter .
Bose George: Okay. Okay, great. Thanks.
Bose George: Okay. Okay, great. Thanks.
Nathaniel Colson: Thank you.
Nathan Colson: Thank you.
Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Speaker #3: Okay, okay, great. Thanks.
Speaker #1: Thank you .
Nathaniel Colson: Thank you, Howard. I want to thank everyone for your interest in MGIC. We will be participating in the UBS and B of A Financial Services conferences next week. I look forward to talking to all of you in the near future. Have a great rest of your week.
Tim Mattke: Thank you, Howard. I want to thank everyone for your interest in MGIC. We will be participating in the UBS and B of A Financial Services conferences next week. I look forward to talking to all of you in the near future. Have a great rest of your week.
Speaker #2: I'm sure there are no questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Speaker #1: Thank Howard you . .
Speaker #7: I want to thank everyone for your interest in MGIC. We will be participating in the UBS and Financial BofA Conferences Services next week.
Operator: Thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.
Operator: Thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.
Speaker #7: I look forward to talking to all of you in the near future . Have a great rest of your week .
Speaker #2: participating in today's Thank you for conference . This concludes the program . You may now disconnect . Everyone , have a wonderful day .
