Q2 2026 MGIC Investment Corp Earnings Call

July 30, 2026

Operator: Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation Q2 2026 earnings call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I will now turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.

Speaker #1: At the end of today's presentation, we'll have a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone.

Speaker #1: You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. I will now turn the conference over to Dianna Higgins, Head of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Ari. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the second quarter are Tim Mattke, Chief Executive Officer; and Nathan Colson, Chief Financial Officer.

Dianna Higgins: Thank you, Ari. Good morning and welcome everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the Q2 are Tim Mattke, Chief Executive Officer, and Nathan Colson, Chief Financial Officer. Our press release, which contains MGIC's Q2 financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom. It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non-GAAP financial measures to their most comparable GAAP measures. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk in force and other information you may find valuable. As a reminder, from time to time, we may post information of our underwriting guidelines and other presentations or corrections to past presentations on our website.

Speaker #2: Our press release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website, at mtg dot mgic dot com under Newsroom.

Speaker #2: It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non-GAAP financial measures to their most comparable GAAP measures.

Speaker #2: In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk enforce and other information you may find valuable.

Speaker #2: As a reminder, from time to time, we may post information about our underwriting guidelines, and other presentations or corrections to past presentations on our website.

Speaker #2: Before getting started today, I want to remind everyone that during the course of this call, we may make comments about our expectations of the future.

Dianna Higgins: Before getting started today, I want to remind everyone that during the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Our 8-K and 10-Q filed yesterday includes additional information about the factors that could cause actual results to differ materially from those discussed on the call today. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. No one should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of our 8-K or 10-Q. With that, I now have the pleasure to turn the call over to Tim.

Speaker #2: Actual results could differ materially from those contained in these forward-looking statements. Our 8-K and 10-Q filed yesterday include additional information about the factors that could cause actual results to differ materially from those discussed on the call today.

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 developments. No one should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of our 8K or 10Q.

Speaker #2: With that, I now have the pleasure to turn the call over to Tim.

Speaker #3: Thanks, Dianna. And good morning, everyone. Our deep industry expertise—strong balance sheet, an unwavering focus on our customers, continue to drive long-term value creation. Our results reflect the strength of our business model, interdisciplinary execution across the business.

Tim Mattke: Thanks, Dianna, and good morning, everyone. Our deep industry expertise, strong balance sheet, and unwavering focus on our customers continue to drive long-term value creation. Our results reflect the strength of our business model and our disciplined execution across the business. In Q2, we generated net income of $182 million, delivering an annualized return on equity of 14.5%. Our consistent execution, combined with the strength of our balance sheet, drove book value per share to $24.27, an increase of 10% year over year, while we also paid $0.60 per share in dividends in the last 12 months. We wrote $18 billion of new insurance in Q2, an increase of 8.5% from Q2 2025, and our highest NIW since Q3 2022.

Speaker #3: In the second quarter, we generated net income of $182 million, delivering an annualized return on equity of 14.5%. Our consistent execution combined with the strength of our balance sheet drove book value per share to $24.27.

Speaker #3: An increase of 10% year over year. While we also paid 60 cents per share in dividends in the last 12 months. We wrote $18 billion of new insurance in the second quarter.

Speaker #3: An increase of 8.5% from the second quarter of 2025, and our highest NIWs since the third quarter of 2022. We expect the increase was due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market.

Tim Mattke: We expect the increase is due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market. Insurance in force end of the quarter at $305 billion, up slightly in the quarter and up 2.6% from a year ago. At the end of Q2, annual persistency was 83%, down slightly from 84% last quarter. Both insurance in force and annual persistency were in line with the expectations we previously shared. We continue to see solid performance across our well-balanced portfolio, supported by strong credit quality and disciplined underwriting practices. Early payment defaults continue to track at low levels, reinforcing our confidence in near-term credit expectations. Our capital structure remains robust with $6 billion of balance sheet capital and a well-established reinsurance program that continues to be a core component of our risk and capital management strategy.

Speaker #3: Insurance enforce end of the quarter at $305 billion. Up slightly in the quarter, and up 2.6% from a year ago. At the end of the second quarter, annual persistency was 83%, down slightly from 84% last quarter.

Speaker #3: Both insurance enforce and annual persistency were in line with the expectations we previously shared. We continue to see solid performance across our well-balanced portfolio, supported by strong credit quality and disciplined underwriting practices.

Speaker #3: Early payment defaults continue to track at low levels, reinforcing our confidence in near-term credit expectations. Our capital structure remains robust, with $6 billion of balance sheet capital and a well-established reinsurance program that continues to be a core component of our risk and capital management strategy.

Speaker #3: Reinsurance agreements with a panel of highly rated reinsurers reduce loss volatility and stress scenarios, while providing capital diversification and flexibility at attractive costs. During the second quarter, we further enhanced our reinsurance program by executing a traditional excess of loss reinsurance transaction, to provide up to $168 million of protection on eligible NIW in 2027.

Tim Mattke: Reinsurance agreements with a panel of highly rated reinsurers reduce loss volatility and stress scenarios while providing capital diversification and flexibility at attractive costs. During Q2, we further enhanced our reinsurance program by executing a traditional excess of loss reinsurance transaction that provides up to $168 million of protection on eligible NIW in 2027. At the end of Q2, our reinsurance program reduced our PMIERs required assets by $3.1 billion, or approximately 52%. 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: At the end of the second quarter, our reinsurance program reduced our PMIRS required assets by $3.1 billion, or approximately 52%. 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 #4: Thanks, Tim, and good morning. As Tim discussed, we had solid financial results for the second quarter. Our net income was $0.86 per diluted share, compared to last year.

Nathan Colson: Thanks, Tim, and good morning. As Tim discussed, we had solid financial results for Q2. We earned net income of $0.86 per diluted share, compared to $0.81 per diluted share last year. Our re-estimation of ultimate losses on prior delinquencies resulted in $43 million of favorable loss reserve development in the quarter. This favorable development primarily reflects better than expected cure activity on delinquency notices received in 2025. As a reminder, delinquency notices in any quarter span multiple book year vintages. For new delinquency notices received in Q2, we continue to apply our initial claim rate assumption of 7.5%. In the quarter, our count-based delinquency rate decreased 7 basis points, which we expect was driven by seasonal trends. Compared to a year ago, the delinquency rate increased 16 basis points to 2.37%.

Speaker #4: Our reestimation of ultimate losses on prior delinquencies resulted in $43 million of favorable loss reserve development in the quarter. This favorable development primarily reflects better-than-expected cure activity on delinquency notices received in 2025.

Speaker #4: As a reminder, delinquency notices in any quarter span multiple book year vintages. For new delinquency notices received in the second quarter, we continue to apply our initial claim rate assumption of 7.5%.

Speaker #4: In the quarter, our count-based delinquency rate decreased 7 basis points, which we expect was driven by seasonal trends. Compared to a year ago, the delinquency rate increased 16 basis points to 2.37%.

Speaker #4: While we expect seasonality to lead to an increase in delinquencies in the second half of the year, the delinquency trends through the second quarter remain consistent with the credit normalization we have been experiencing for the past three years, and the delinquency rate remains 43 basis points below the second quarter of 2019.

Nathan Colson: While we expect seasonality to lead to an increase in delinquencies in the H2, the delinquency trends through the Q2 remain consistent with the credit normalization we have been experiencing for the past three years, and the delinquency rate remains 43 basis points below the Q2 2019. The in-force premium yield was 38 basis points in the Q2, down a little less than one basis point in the past three years. With high persistency expected in 2026 and MI origination trends similar to last year, we expect the in-force premium yield to continue on a similar path to the past couple of years. Investment income totaled $59 million in the Q2, and the book yield on our investment portfolio remains approximately 4%.

Speaker #4: The enforce premium yield was 38 basis points in the quarter, down a little less than 1 basis point in the past three years. With high persistency expected in 2026 and MI origination trends similar to last year, we expect the enforce premium yield to continue on a similar path to the past couple of years.

Speaker #4: Investment income totaled $59 million in the second quarter, and the book yield on our investment portfolio remains approximately 4%. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield, but our capital return activities have limited the growth in the investment portfolio and the resulting investment income.

Nathan Colson: During the Q2, reinvestment rates on our fixed income portfolio continued to exceed our book yield, but our capital return activities have limited the growth in the investment portfolio and the resulting investment income. Underwriting and other expenses in the Q2 were $46 million, down from $52 million in the Q2 last year, as we remain focused on disciplined expense management. We now expect operating expenses for the full year to be toward the low end of the $190 million to $200 million range we previously shared. Our approach to capital management remains unchanged. We prioritize prudent insurance in-force growth over capital return. Market conditions have constrained insurance in-force growth in recent years, and against that backdrop, our capital return activity reflects continued strong mortgage credit performance and our robust financial position. In the Q2, we paid a common stock dividend of $0.15 per share.

Speaker #4: Underwriting and other expenses in the quarter were $46 million. Down from $52 million in the second quarter last year, as we remain focused on disciplined expense management.

Speaker #4: We now expect operating expenses for the full year to be toward the low end of the $190 million to $200 million range we previously shared.

Speaker #4: Our approach to capital management remains unchanged. We prioritize prudent insurance enforce growth over capital return. Market conditions have constrained insurance enforce growth in recent years, and against that backdrop, our capital return activity reflects continued strong mortgage credit performance, and our robust financial position.

Speaker #4: In the second quarter, we paid a common stock dividend of $0.15 per share. We also repurchased 6.6 million shares of stock for $177 million.

Nathan Colson: We also repurchased 6.6 million shares of stock for $177 million. Over the prior four quarters, share repurchases totaled $746 million, and shareholder dividends totaled $135 million. Combined, they represented a 124% payout of the net income earned over the period. The strong financial position of both the holding company and the operating company was a key factor in the board's decision last week to approve an increase to our quarterly common stock dividend to $0.17 per share. This marks six consecutive years of dividend increases, representing a compound annual growth rate of 19% over that period. With that, let me turn it back over to Tim.

Speaker #4: Over the prior four quarters, share repurchases totaled $746 million, and shareholder dividends totaled $135 million. Combined, they represented a $124% payout of the net income earned over the period.

Speaker #4: The strong financial position of both the holding company and the operating company was a key factor in the board's decision last week to approve an increase to our quarterly common stock dividend to 17 cents per share, this marked six consecutive years of dividend increases, representing a compound annual growth rate of 19% over that period.

Speaker #4: With that, let me turn it back over to Tim.

Speaker #3: Thanks, Nathan. Last month, I assumed the role of chairman of USMI, our industry's trade association. Through decades of economic cycles, mortgage insurance has consistently demonstrated its value to homeowners, lenders, and the broader housing finance system.

Tim Mattke: Thanks, Nathan. Last month, I assumed the role of Chairman of USMI, our industry's trade association. Through decades of economic cycles, mortgage insurance has consistently demonstrated its value to homeowners, lenders, and the broader housing finance system. Mortgage insurance is at the center of several important policy discussions, and we're committed to ensuring those conversations are informed by data, experience, and a proven track record. I look forward to working with our great team at USMI and being able to represent the industry in those conversations. Turning back to MGIC, our Q2 results demonstrate the benefits of disciplined execution and the strategy we've thoughtfully refined over time. This long-term approach has supported our competitive position, driven strong business performance, and generated meaningful returns for shareholders.

Speaker #3: Mortgage insurance is at the center of several important policy discussions, and we're committed to ensuring those conversations are informed by data, experience, and a proven track record.

Speaker #3: I look forward to working with our great team at USMI and being able to represent the industry in those conversations. Turning back to MGIC, our second quarter results demonstrate the benefits of disciplined execution and the strategy we've thoughtfully refined over time.

Speaker #3: This long-term approach has supported our competitive position, driven strong business performance, and generated meaningful returns for shareholders. Combined with our continued commitment to our customers, we believe we are well positioned to capitalize on opportunities managed through evolving market conditions and deliver long-term value.

Tim Mattke: Combined with our continued commitment to our customers, we believe we are well positioned to capitalize on opportunities, manage through evolving market conditions, and deliver long-term value. With that, Ari, let's take questions.

Speaker #3: With that, Ari, let's take questions.

Speaker #2: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Speaker #2: To withdraw your question, please press star 11 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Terry Ma: Hey, thank you. Good morning. Just want to get your latest thoughts on credit. I think, Nathan, last quarter, you called out a 10 to 15 basis point year over year increase in the delinquency rate as consistent with credit normalization. We're certainly in that ballpark the last two quarters. Is there any color you can provide on new notices by region or even vintage that can maybe just inform our view of credit going forward?

Speaker #5: Hey, thank you. Good morning. I just wanted to get your latest thoughts on credit. I think, Nathan, last quarter you called out a 10 to 15 basis point year-over-year increase in the delinquency rate as consistent with credit normalization.

Speaker #5: We're certainly in that ballpark the last two quarters. So is there any color you can kind of provide on new notices by region or even vintage that can maybe just inform our view of credit going forward?

Speaker #4: Good. Terry, it's Nathan. Thanks for the question. It is something that we look at closely not just quarterly, but really on a monthly basis.

Nathan Colson: Yeah. Terry, it's Nathan. Thanks for the question. It is something that we look at closely, not just quarterly, but really on a monthly basis. What is the mix of new delinquencies? What are we seeing in maybe early payment default trends? What are we seeing across certainly any of the single dimension variables, but even multiple dimensions. As we look at it, other than kind of the continuous roll forward to more recent vintages, which is what you would expect, when we look at it across other key credit variables, we really don't see a lot of difference in the mix, and we're not seeing it geographically. We're not seeing it really correlated to, say, home price changes in various states.

Speaker #4: What is the mix of new delinquencies? What are we seeing in maybe early payment default trends? What are we seeing across any of the certainly any of the single-dimension variables, but even multiple dimensions?

Speaker #4: And as we look at it, other than kind of the continuous roll forward to more recent vintages, which is what you would expect, when we look at it across other key credit variables, we really don't see a lot of difference in the mix, and we're not seeing it geographically.

Speaker #4: We're not seeing it really correlated to, say, home price changes in various states. So again, that's something that makes us feel confident that we're looking at a broad-based credit normalization versus real deterioration in any segments, or anything that is going to lead to changes that we feel like we need to make.

Nathan Colson: Again, something that makes us feel confident that we're looking at a broad-based credit normalization versus real deterioration in any segment or anything that is going to lead to changes that we feel like we need to make.

Speaker #5: Got it. And if we think about the cure rate, all the post-COVID vintages about 90% of new notices cure within four quarters. I think, Tim, when I had you on stage at my conference a few years ago, you gave a number pre-pandemic that was lower than 90%.

Terry Ma: Got it. If we think about the cure rate, all the post-COVID vintages, about 90% of new notices cure within 4 quarters. I think, Tim, when I had you on stage at my conference a few years ago, you gave a number pre-pandemic that was lower than 90%. I'm just wondering, as we track all the data, everything's kind of tracking toward that 90% mark. Do you expect normalization going forward lower than 90% at any given point? Just trying to think about that.

Speaker #5: I'm just wondering, as we track all the data, everything's kind of tracking toward that 90% mark. Do you expect normalization going forward, lower than 90% at any given point?

Speaker #5: Just trying to think about that.

Speaker #4: Good. Terry, it's Nathan. I maybe think about it less at a particular point in time. In terms of maybe 12 months after delinquency, what we're really focused on is what is the ultimate claim rate going to be on a group of new notices?

Nathan Colson: Yeah. Sure is, Nathan. I maybe think about it less at a particular point in time, in terms of maybe 12 months after delinquency. What we're really focused on is what is the ultimate claim rate going to be on a group of new notices. When we set our initial expectations at 7.5%, that's looking on a fully developed basis, what % of those new notices are ultimately going to result in a claim. The consistent favorable development that we've had as a result of actual claim rates being quite a bit lower than that 7.5% that we were putting up initially.

Speaker #4: So when we set our initial expectations at 7.5%, that's looking on a fully developed basis. What percent of those new notices are ultimately going to result in a claim?

Speaker #4: And the consistent favorable development that we've had as a result of actual claim rates being quite a bit lower than that 7.5% that we're putting up initially.

Speaker #4: I will say, and we've talked about this over the last couple of calls too, we're coming off the kind of lowest point for us for the new notice claim rate was the second quarter of 2020, the kind of peak COVID quarter, which ultimate claim rates are less than 1% out of that group.

Nathan Colson: I will say, and we've talked about this over the last couple of calls, too, we're coming off the kind of lowest point for us for the new notice claim rate was Q2 2020, the kind of peak COVID quarter, which ultimate claim rates are less than 1% out of that group. We're certainly not running at that level anymore. Today it looks like fully developed notice quarters maybe from, say, 2 or 3 years ago, are more in that 2% to 3% range. More recent, maybe trending slightly higher than that. Fully developed notice quarters today, we might be thinking 3% to 4% ultimate claim rates. Still quite a bit lower than what we're expecting on new notices.

Speaker #4: So we're certainly not running at that level anymore. But today, it looks like fully developed notice quarters—maybe from, say, two or three years ago—are more in that 2% to 3% range.

Speaker #4: And more recent, maybe trending slightly higher than that. So fully developed notice quarters today, we might be thinking 3 to 4% ultimate claim rate.

Speaker #4: So, still quite a bit lower than what we're expecting on new notices. And I think that's because the actual conditions have played out quite favorably over the last two or three years, although there's been a lot of uncertainty at every point along the way.

Nathan Colson: I think that's because the actual conditions have played out quite favorably over the last two or three years, although there's been a lot of uncertainty at every point along the way. I think we still feel quite comfortable with our initial new notice expectations, but if credit conditions remain what they are today, we likely will have additional reserve redundancy that will be released through favorable development in the future.

Speaker #4: So I think we still feel quite comfortable with our initial new notice expectations. But if credit conditions remain what they are today, we likely will have additional reserve redundancy that will be released through favorable development in the future.

Terry Ma: Got it. Thanks for the color.

Speaker #5: Got it. Thanks for the color.

Speaker #4: Thank you.

Nathan Colson: Thank you.

Speaker #2: Thank you. Our next question comes from the line of Bose George of KBW. Your line is now open.

Operator: Thank you. Our next question comes from the line of Bose George of KBW. Your line is now open.

Speaker #6: Hey, guys. Good morning. Just first wanted to just ask about competitive trends in the market, anything to call out there. And then your gross premium yield, it looked like it ticked down a tiny bit.

Bose George: Hey, guys. Good morning. Just first wanted to just ask about competitive trends in the market, anything to call out there. Your gross premium yield, it looks like it ticked down a tiny bit. Is that just noise?

Speaker #6: Is that just noise?

Speaker #3: Yeah. In Bose, I mean, from competitive dynamics, again, it's a competitive marketplace, right, with six active participants. I wouldn't say anything stands out in this quarter.

Nathan Colson: Yeah. Bose, from competitive dynamics, again, it's a competitive marketplace, with six active participants. I wouldn't say anything stands out in this quarter. As you said, when we look at sort of the gross premium rate, which is what we really focus on, it did grind down a little bit more this quarter, and that's sort of been the trend over the last couple of years, quite frankly. Not any major changes quarter to quarter, but the trend has been slightly downward. Not unexpected from our standpoint. Again, nothing that has changed in the sort of competitive marketplace that's caused that, but it has been the general sort of form of direction, but not anything that's sort of steepening or anything in that regard.

Tim Mattke: Yeah. Bose, from competitive dynamics, again, it's a competitive marketplace, with six active participants. I wouldn't say anything stands out in this quarter. As you said, when we look at sort of the gross premium rate, which is what we really focus on, it did grind down a little bit more this quarter, and that's sort of been the trend over the last couple of years, quite frankly. Not any major changes quarter to quarter, but the trend has been slightly downward. Not unexpected from our standpoint. Again, nothing that has changed in the sort of competitive marketplace that's caused that, but it has been the general sort of form of direction, but not anything that's sort of steepening or anything in that regard.

Speaker #3: As you said, the when we look at sort of the gross premium rate, which is what we really focus on, it did grind down a little bit more this quarter.

Speaker #3: And that's sort of been the trend over the last couple of years, quite frankly. So not any major changes quarter to quarter, but the trend has been slightly downward.

Speaker #3: Not unexpected from our standpoint. So again, nothing that is changed in the sort of competitive marketplace that's caused that. But it has been the general sort of form of direction, but not anything that's sort of steepening or anything in that regard.

Bose George: Okay. Great. Thanks. Actually on reinsurance, you guys did the transaction. Just can you compare the execution in the traditional reinsurance versus the ILN market? Is the benefit here more structural, or is the pricing better here, or just, yeah, can you just contrast the two?

Speaker #6: Okay. Great. Thanks. And then actually, on reinsurance, so you guys did the transaction. Just can you compare the execution in the traditional reinsurance versus the ILN market?

Speaker #6: Is the benefit here more structural, or is the pricing better here, or just—yeah, can you just contrast the two?

Speaker #4: Yep. Bose and Nathan, I think the biggest thing—the XOL that we just did is really covering 2027 and IW, whereas the ILN market is all on a kind of warehoused, already-in-force loan.

Nathan Colson: Yep. Bose, it's Nathan. I think the biggest thing, the XOL that we just did is covering 2027 NIW. Whereas the ILN market is all on a kind of a warehoused, already enforced loan, so we have to spend time to build a pool. I think there's also a lot of fixed costs associated with doing those deals and kind of size requirements that are expected in the market. Whereas you can do smaller reinsurance deals. Our intention is to be programmatic in both the excess of loss and ILN markets. The ILN deals are individually a little bit larger. Since we have to warehouse the risk, just happen at a slightly less frequent cadence. We've done deals pretty consistently. We've had fill-up periods as short as 5 months in the ILN market and as long as maybe 2 years, just depending on volume.

Speaker #4: So we have to spend time to build a pool. I think there's also a lot of fixed costs associated with doing those deals and kind of size requirements that are expected in the market.

Speaker #4: Whereas you can do smaller reinsurance deals. So our intention is to be programmatic in both the excessive loss and ILN markets. But the ILN deals are individually a little bit larger.

Speaker #4: And since we have to warehouse the risk, just happen at a slightly less frequent cadence, but we've done deals pretty consistently. We've had fill-up periods as short as five months in the ILN market and as long as maybe two years just depending on volume.

Speaker #4: So it's a market that we want to continue to operate in. But I don't view the excessive loss deal that we did covering our 2027 in IW as indicative of we're not interested in the ILN market.

Nathan Colson: It's a market that we want to continue to operate in, but I don't view the excess of loss deal that we did covering our 2027 NIW as indicative of we're not interested in the ILN market. They're just kind of different executions in different parts of our program.

Speaker #4: They're just kind of different executions and different parts of our program.

Bose George: Okay, great. Thanks.

Speaker #6: Okay. Great. Thanks.

Speaker #2: Thank you. Our next question comes from the line of Mahir Bhatia of Bank of America. Your line is now open.

Operator: Thank you. Our next question comes from the line of Mihir Bhatia of Bank of America. Your line is now open.

Speaker #7: Good morning. Thank you for taking my question. I just wanted to maybe first just start big picture, just given the I think you talked a little bit about credit conditions.

Mihir Bhatia: Good morning. Thank you for taking my question. I just wanted to maybe first just start big picture, I think you talked a little bit about credit conditions. Just given moving rates, housing, and your view on the housing fundamentals, maybe talk about industry NIW this year. Related to that, just trying to understand the underwriting posture. Are you tightening, loosening anywhere on the margin? Just your thoughts around that. Thank you.

Speaker #7: Just given move-in rates and housing, what's your view on the housing fundamentals? Maybe talk about the industry and IW this year. And related to that, I just wanted to understand the underwriting posture.

Speaker #7: Are you tightening or loosening anywhere on the margin? Just your thoughts around that. Thank you.

Speaker #3: Yeah. No, Mahir, appreciate the question. I mean, I think as far as the market goes, the size has been been fairly consistent, what we would expected coming into the year, right?

Tim Mattke: Yeah, Anoma here. Appreciate the question. I think as far as the market goes, the size has been fairly consistent what we'd expected coming into the year, right? There's modest home price appreciation out there in certain parts. Purchase again, it was our second largest, or it was our largest NIW since 2022, and up from where we were a year ago. Again, you continue to see positive signs in the purchase market. Refi market, obviously, is going to be really stunted by where rates are right now. Again, I don't think we bank on that changing. Again, for us, that's normally churn in the portfolio as opposed to things that really helps us grow in-force. Affordability definitely continues to be stretched, again, with where interest rates are and where home prices are.

Speaker #3: There's modest home price appreciation out there in certain parts, purchase, again, it was our second largest or was our largest in IW since 2022 and up from where we were a year ago.

Speaker #3: So again, you continue to see positive signs in the purchase market. Refi market, obviously, is going to be really stunted by where rates are right now.

Speaker #3: And so again, I don't think we bank on that changing. But again, for us, that's normally churn in the portfolio as opposed to anything that really helps us grow in force.

Speaker #3: Affordability is definitely continues to be stretched, again, with where interest rates are and where home prices are. I think it makes it difficult to see a large change in sort of people coming to be buyers in this market.

Tim Mattke: I think it makes it difficult to see a large change in sort of people coming to be buyers in this market. I think you can see that probably there's some thawing and sort of lock-in effect as far as people willing to sell their homes that have good interest rates. Again, as interest rates remain high generally, that makes it tougher to see that really sort of break loose in a meaningful way. Again, I'm a general believer that sort of the market we have felt for this quarter and feels like we've been in for the last year for the most part in the little mini refi ways is sort of what we're in for the foreseeable future. That doesn't create a lot of growth for us. As Nathan said, we'd love to grow the in-force portfolio.

Speaker #3: I think you can see the probably there's some thawing and sort of the lock in effect as far as people willing to sell their homes that have good interest rates.

Speaker #3: But again, as interest rates remain high generally, that makes it tougher to see that really sort of break loose in any meaningful way. So again, I'm a general believer that the market we have felt for this quarter, and feels like we've been in for the last year for the most part with the little mini refi waves, is sort of what we're in for the foreseeable future.

Speaker #3: So that doesn't create a lot of growth for us, but as Nathan said, we'd love to grow the in-force portfolio. But really, we want to do that if the overall sort of pie is growing.

Tim Mattke: Really, we want to do that if the overall sort of pie is growing. If it's not growing, we're content to return that capital to shareholders if we think that's the right answer.

Speaker #3: And if it's not growing, we're content to return that capital to shareholders if we think that's the right answer.

Speaker #7: And then just from a credit perspective, is there any loosening or tightening going on at the margin? Maybe any thoughts around just how a softer home price backdrop could flow through or two?

Mihir Bhatia: Just from a credit perspective, is there any loosening or tightening going on at the margin? Maybe any thoughts around just how a softer home price backdrop could flow through or do?

Speaker #4: Yeah. Here's Nathan. I mean, I would say from a actual underwriting guideline perspective, there really hasn't been meaningful changes in quite some time from our guidelines.

Nathan Colson: Yeah. Here, it's Nathan. I would say from an actual underwriting guideline perspective, there really hasn't been meaningful changes in quite some time from our guidelines. The mix of business has been quite consistent as well. I think if anything, over the last two years, there's been a slight decrease in the amount of above 45 DTI business that's been done, but that's maybe the most notable change that I would see that wasn't necessarily a result of guideline changes by us. I think just what was getting done in the market changed a little bit. I think we're quite comfortable with the mix that we're getting and the risk-adjusted returns really across the spectrum. I don't feel a need to make any meaningful underwriting changes right now given expected performance or actual performance to date.

Speaker #4: In the mix of business has been quite consistent as well. I think if anything over the last two years, there's been a slight decrease in the amount of above 45 DTI business that's been done, but that's maybe the most notable change that I would see that wasn't necessarily a result of guideline changes bias.

Speaker #4: I think just what was getting done in the market changed a little bit. So I think we're quite comfortable with the mix that we're getting and the risk-adjusted returns really across the spectrum.

Speaker #4: So I don't feel a need to make any meaningful underwriting changes right now, given expected performance or actual performance to date.

Mihir Bhatia: All right. Just my last question, just around buyback. Obviously, you have a new authorization in place. Should we view that as a signal of an acceleration, or is it more just continuing the current steady state because you've been returning a fair amount of capital already? Yeah.

Speaker #7: And then just my last question, just around buybacks. Obviously, I have a new authorization in place. Could we view that as a signal of an acceleration, or is it more just continuing the current steady state?

Speaker #7: Because you've been returning a fair amount of capital already. So yeah.

Speaker #3: Yeah. I wouldn't view it as an acceleration. I think it'd be I view it as a continuation. And we always want to make sure we have authorized shares to continue to execute the way we have been.

Tim Mattke: Yeah, I wouldn't view it as an acceleration. I think I'd view it as continuation, and we always want to make sure we have authorized shares to continue to execute the way we have been. As Nathan's talked over time, we try to size it appropriately based upon sort of earnings and capital generation. I think, when we talked with the board about sort of the authorization, it was much more of a continuance of what we've been doing as opposed to sort of any acceleration of what we have been doing.

Speaker #3: And as Nathan's talked over time, we've tried to size it appropriately based upon sort of earnings and capital generation and so I think when we talk with the board about sort of the authorization, it was much more of a continuance of what we've been doing as opposed to sort of any acceleration of what we did have been doing.

Speaker #7: Got it. Thank you. Thank you for taking my question.

Mihir Bhatia: Got it. Thank you. Thank you for taking my question.

Speaker #2: Thank you. Our next question comes from the line of Roland Mayer of RBC Capital Markets. Your line is now open.

Operator: Thank you. Our next question comes from the line of Roland Mayer of RBC Capital Markets. Your line is now open.

Speaker #5: Hi. Good morning. I guess just going quickly off Mahir's question on the quarter to date disclosure on the buyback, is that just slowed down because you're in blackout and that would set prior to the stock moving higher?

Roland Mayer: Hi. Good morning. I guess just going quickly off Anoma's question. On the quarter to date disclosure on the buyback, has that just slowed down because you're in blackout and that was set prior to the stock moving higher?

Rowland Mayor: Hi. Good morning. I guess just going quickly off Anoma's question. On the quarter to date disclosure on the buyback, has that just slowed down because you're in blackout and that was set prior to the stock moving higher?

Speaker #4: Yeah. Roland, it's Nathan. I think we've been what we've been talking about for some time is really trying to size the share repurchases in this market where we aren't really growing the in-force credit conditions remain good.

Nathan Colson: Yeah. Roland, it's Nathan. I think what we've been talking about for some time is really trying to size the share repurchases in this market where we aren't really growing the in-force. Credit conditions remain good. We're generating a lot of organic capital that we don't think we can prudently redeploy into the business. Trying to size the share repurchases approximately equal to the net income. We're not exactly sure what the net income is going to be, obviously, in any period. I think if you look on a six-month, rolling twelve-month basis, we've done a pretty good job of triangulating the share repurchases to be approximately equal to that and then slowly drawing down the excess liquidity and capital at the holding company via the shareholder dividend every quarter. It's not going to be possible, I think, for us to get it exactly right each quarter.

Speaker #4: We're generating a lot of organic capital that we don't think we can prudently redeploy into the business. Trying to size the share repurchases approximately equal to the net income.

Speaker #4: And that's we're not exactly sure what the net income is going to be. Obviously, in any period, but I think if you look on a six-month rolling 12-month basis, we've done a pretty good job of trangulating the share repurchases to be approximately equal to that.

Speaker #4: And then slowly drawing down the excess liquidity and capital at the holding company via the shareholder dividend every quarter. So it's not going to be possible, I think, for us to get it exactly right each quarter, but we're largely targeting share repurchases to be approximately net income in this kind of environment.

Nathan Colson: We're largely targeting share repurchases to be approximate net income in this kind of environment.

Speaker #5: Thank you. And then I guess a lot of your risk enforce remains in the pre-22 years. Is those policies aged? Are we approaching any sort of cliff where larger portions detach?

Roland Mayer: Thank you. I guess a lot of your risk in-force remains in the pre 2022 years. As those policies age, are we approaching any sort of cliff where larger portions detach as the LTV hits 78?

Rowland Mayor: Thank you. I guess a lot of your risk in-force remains in the pre 2022 years. As those policies age, are we approaching any sort of cliff where larger portions detach as the LTV hits 78?

Speaker #5: Is the LTV hit 78?

Speaker #4: Yes. It's Nathan again. I appreciate the question. And it's something that we actually talked about quite a bit internally lately. And if you think about a book of business for us, it's really across the LTV spectrum from a lot of 85s, 90s, 95, and a significant still amount of 97 business even in those years.

Nathan Colson: Yes, it's Nathan again. I appreciate the question. It's something that we actually talked about quite a bit internally lately. If you think about a book of business for us, it's really across the LTV spectrum, a lot of 85s, 90s, 95, and a significant still amount of 97 business even in those years.

Speaker #4: Most of the 85 LTV loans from those book years that were borrowed and were paid subject to the Homeowner's Protection Act have already canceled their coverage.

Nathan Colson: Most of the 85 LTV loans from those book years that were borrower-paid, subject to the Homeowners Protection Act, have already canceled their coverage. It becomes more concentrated in the higher LTVs. There's really no cliff event because there's a distribution of interest rates within those years, too. At lower rates, you get to that point faster, but for a 95 or 97, it's still several years. It's happening every month that that fall-off happens. We estimate about maybe 4 to 5 percentage points of our fall-off. Persistency is, say, 83%, about 5 percentage points of that 17 that's falling off is due to the Homeowners Protection Act. It's really been that way. We started tracking this more closely in the last several years, but 4 or 5 years ago, it was about the same.

Speaker #4: So it becomes more concentrated in the higher LTVs. But there's really no cliff event because there's a distribution of interest rates within those years too.

Speaker #4: So at lower rates, you get to that point faster. But for a 95 or 97, there's still several years. So it's happening every month that that falloff happens.

Speaker #4: We estimate about maybe 4 to 5 percentage points of our falloff. So if persistency is, say, 83%, about 5 percentage points of that 17 that's falling off is due to the homeowner's protection act.

Speaker #4: And it's really been that way for the last we started tracking this more closely in the last several years, but 4 or 5 years ago, it was about the same.

Speaker #4: So this is something that's kind of in the background, but I think it's pretty embedded in persistency and has been over time. So we don't see a big cliff coming or anything like that.

Tim Mattke: This is something that's kind of in the background, but I think it's pretty embedded in persistency and has been over time. We don't see a big cliff coming or anything like that. It's just something that's happening every month.

Speaker #4: It's just something that happens every month.

Speaker #5: Thank you. And then if I could just sneak one more it's a soft P&C market. And I'm just curious if excess capital and reinsurance markets is helping you secure better terms on your own purchases.

Roland Mayer: Thank you. If I could just sneak one more. It's a soft P&C market, and I'm just curious if excess capital in reinsurance markets is helping you secure better terms on your own purchases.

Rowland Mayor: Thank you. If I could just sneak one more. It's a soft P&C market, and I'm just curious if excess capital in reinsurance markets is helping you secure better terms on your own purchases.

Tim Mattke: I think from reinsurance, anything markets that are adjacent or that reinsurers are trying to think about how to deploy their capital and where returns are, it can have an impact. I think our continued sort of activities in the market and sort of programmatic way of going about it helps us as well. I think it's true that from a broader MI industry standpoint, the fact that GSEs have laid off less risk into those markets has probably helped us bring more reinsurers to the table. Because if they're looking for mortgage credit in the US, the MIs and MGIC are one spot that they can get it pretty consistently. I think that all those things have been beneficial to us as we look to place reinsurance in those markets.

Speaker #3: I think from reinsurance, anything markets right that are adjacent or that reinsurers are trying to think about how to deploy their capital and where returns are, it can have an impact.

Speaker #3: I think our continued sort of activities in the market and sort of programmatic way of going about it helps us as well. And I think it's true that from a broader MI industry standpoint, the fact that the GSEs have laid off less risk into those markets has probably helped us bring table.

Speaker #3: Because if they're looking for mortgage credit in the US, the MIs and MGIC are one spot that they can get a pretty consistently. So I think that's all of those things have been beneficial to us as we look to place reinsurance in those markets.

Speaker #5: Thank you. Have a great rest of your summer.

Roland Mayer: Thank you. Have a great rest of your summer.

Rowland Mayor: Thank you. Have a great rest of your summer.

Speaker #3: Sure. You too.

Tim Mattke: Sure. You too. Thank you.

Speaker #4: Thank you.

Speaker #2: Our next question comes from the line of Joffrey Dunn of Dowling & Partners. Your line is now open.

Operator: Our next question comes from the line of Geoffrey Dunn of Dowling & Partners. Your line is now open.

Geoffrey Dunn: Thanks. Good morning. I had another question on reinsurance. Specifically, how do you go about approaching the incremental level of reinsurance you want to put on a forward book? Obviously, you don't have a crystal ball about future credit. Just on the 2027 XOL, for example, how did you decide on the loss band that you wanted to achieve? Does capital management come into play on that excess capital? Just some color on how you think about approaching incremental reinsurance, whether it is XOL or ILN.

Speaker #6: Thanks. Good morning. I had another question on reinsurance. Specifically, how do you go about approaching the incremental level of reinsurance you want to put on a forward book?

Speaker #6: So obviously, you don't have a crystal ball about future credit. How did you, on the 27 XOL, for example, how did you decide on the loss band that you wanted to achieve?

Speaker #6: Does capital management come into play on that excess capital? Just some color on how you think about approaching incremental reinsurance, whether it's XOL or ILN.

Nathan Colson: Yeah. Geoff, it's Nathan. Appreciate the question. I mentioned before, we really think about our reinsurance program across the three key dimensions are quota share reinsurance, traditional XOL, and the ILN market. It's not exactly the case every book year, but we try to do about a third of the risk sharing across each of those three categories. We've done up to, say, 40% quota shares. The excess of loss deals that we've done in recent years have allocated about 30% of the risk to them, and that leaves about 30% of the risk for the ILN market, which I think has worked quite well for us. In terms of actual structuring of the individual transactions, I think there's a pretty consistent pattern that has emerged in terms of what works well with reinsurers.

Speaker #4: Yeah. Jeff, it's Nathan. Appreciate the question. And I mentioned before, we really think about our reinsurance program across three the three key dimensions are quota share reinsurance, traditional XOL, and the ILN market.

Speaker #4: And it's not exactly the case every book year, but we try to do about a third of the risk sharing across each of those three categories.

Speaker #4: So we've done up to, say, 40% quota shares the excess of loss deals that we've done in recent years have allocated about 30% of the risk to them.

Speaker #4: And that leaves about 30% of the risk for the ILN market, which I think has worked quite well for us. In terms of actual structuring of the individual transactions, there is a I think there are transactions there's a pretty consistent pattern that has emerged in terms of what works well with reinsurers.

Speaker #4: So trying to seed maybe first dollar loss would be less efficient from a capital standpoint and less alignment of interest from reinsurer's perspective. So us retaining a meaningful amount of the initial and first loss position, I think, is helpful.

Tim Mattke: Trying to cede maybe first dollar loss would be less efficient from a capital standpoint and less alignment of interest from reinsurers' perspective. Us retaining a meaningful amount of the initial and first loss position, I think, is helpful. Detachment points across maybe ILN and excess of loss structures where if the PMIERs requirement, let's say, is 7%, traditional structure would be the MIs, MGIC, and others that we observe in the market retaining the first, say, two and a half to 3% of that and then ceding the next, say, three and a half to 4% up to the PMIERs level. I think that has emerged that way because that works quite well for reinsurers. It's quite risk remote, and then the cost of capital is very attractive from our perspective.

Nathan Colson: Trying to cede maybe first dollar loss would be less efficient from a capital standpoint and less alignment of interest from reinsurers' perspective. Us retaining a meaningful amount of the initial and first loss position, I think, is helpful. Detachment points across maybe ILN and excess of loss structures where if the PMIERs requirement, let's say, is 7%, traditional structure would be the MIs, MGIC, and others that we observe in the market retaining the first, say, two and a half to 3% of that and then ceding the next, say, three and a half to 4% up to the PMIERs level. I think that has emerged that way because that works quite well for reinsurers. It's quite risk remote, and then the cost of capital is very attractive from our perspective.

Speaker #4: So detachment points, across maybe ILN and excess of loss structures, where if the PMIRS requirement, let's say, is 7%, traditional structure would be the MIs MGIC and others that we observe in the market retaining the first, say, two and a half to three percent of that and then seeding the next, say, three and a half to four percent up to the PMIRS level.

Speaker #4: And I think that has emerged that way because that works quite well for reinsurers. It's quite risk remote. And then the cost of capital is very attractive from our perspective.

Speaker #4: So I think a combination of those factors leads to a kind of a normalization in what structures look like. I don't think it means that you can't do other things, but those other things come with additional cost.

Tim Mattke: I think a combination of those factors leads to a kind of a normalization in what structures look like. I don't think it means that you can't do other things, but those other things come with additional cost, and right now we feel like we're putting a lot of protection on the recent vintages, which is our goal.

Nathan Colson: I think a combination of those factors leads to a kind of a normalization in what structures look like. I don't think it means that you can't do other things, but those other things come with additional cost, and right now we feel like we're putting a lot of protection on the recent vintages, which is our goal.

Speaker #4: And right now, we feel like we're putting a lot of protection on the recent vintages, which is our goal.

Speaker #6: And how does the layering of XOL and ILN work? If you're attaching at 3% on an ILN, are you laying off the 2 to 3 percent band through the traditional XOL?

Geoffrey Dunn: How does the layering of XOL and ILN work? If you're attaching a 3% on an ILN, are you laying off the 2% to 3% band through the traditional XOL? How does that mechanically work?

Speaker #6: How does that mechanically work?

Nathan Colson: Yeah. If you think about it in maybe the quota share terms, in a 40% quota share, we're ceding 40% of the premium and 40% of the losses and 40% of the associated capital requirement. Those deals obviously have a profit commission, which makes them, in attractive times, more beneficial than a straight quota share to us. We're still retaining at a loan level the remaining 60% of the risk. We then have that 60% at the loan level to allocate to other deals. When I say 30%, it's not 30%, say, of the layer or 30% of the loans. It's really 30% of our retention of our risk in force at the loan level is going into the excess of loss deal.

Speaker #4: Yeah, if you think about it in maybe the quota share terms—so, on a 40% quota share, we're ceding 40% of the premium, 40% of the losses, and 40% of the associated capital requirement.

Speaker #4: Those deals obviously have a profit commission, which makes them inattractive times more beneficial than a straight quota share to us. But we're still retaining at a loan level the remaining 60% of the risk.

Speaker #4: We then have that 60% at the loan level to allocate to other deals. So when I say 30%, it's not 30%, say, of the layer or 30% of the loans.

Speaker #4: It's really 30% of our retention of our risk enforce at the loan level is going into the excess of loss deals. So the same loan on our, say, 2024 vintage where we have or 2025 where we have quota share excess of loss and ILN coverage, the same loan would be in all three of those deals.

Nathan Colson: The same loan on our, say, 2024 vintage or 2025 where we have quota share excess of loss and ILN coverage, the same loan would be in all three of those deals. Just maybe 40% of the risk of that loan in one deal, 30% in another, and 30% in another. They sit side by side versus maybe being below or on top of one another.

Speaker #4: Just maybe 40% of the risk of that loan in one deal, 30% in another, and 30% in another. So it's we don't have to they sit side by side versus maybe being below or on top of one another.

Speaker #6: Okay. Great. Thank you.

Geoffrey Dunn: Okay, great. Thank you.

Speaker #4: Thank you.

Tim Mattke: Thank you.

Nathan Colson: Thank you.

Operator: There are no further questions. I will now turn the call back over to management for closing remarks.

Speaker #2: There are no further questions. I will now turn the call back over to management for closing remarks.

Speaker #3: Thank you, Ari. I want to thank everyone for your interest in MGIC. Have a great rest of your week.

Tim Mattke: Thank you, Ari. I want to thank everyone for your interest in MGIC. Have a great rest of your week.

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

Q2 2026 MGIC Investment Corp Earnings Call

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