MTG - Earnings call transcript Q2 2020 | MGIC Investment Corporation

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation Second Quarter Earnings Call. [Operator Instructions]. I'd now like to hand the conference over to your speaker today, Mr. Mike Zimmerman. Please go ahead.

Michael Zimmerman

you. Thank thank in us MGIC and for morning for interest your Investment you morning, this joining and Good Corporation.

Chief of Joining to me Nathan that XXXX Colson. quarter all to Financial our discuss today Tim are year-end participants the results I under and on that for the Officer, the may the website, during Chief it Executive Officer, call earnings which remind Mattke; want will second at mtg.mgic.com of company's to MGIC's is about information results on this Newsroom, be morning, the additional accessed includes we financial which refer certain quarterly includes measures. located call, non-GAAP release

other we We valuable. listeners may past to corrections post have may risk information new to that in also about on a or and presentation presentations on interested and to think our investors website in time underwriting want presentations our well. to and which valuable that as other will you that from information contains other I remind we find time, guidelines primary our our find information force, pertaining website parties written posted insurance

those Actual During could about our future. make the differ call, comments of of forward-looking the materially course may expectations statements. these this we contained from in results

time, or time this of like to than or to the the rely over Tim. the obligation no Further, current the time Additional this or company at in not the to are the materially Form factors, actual future turn forward-looking If X-K from was issuance I'd fact an information any cause subsequent XX-Q last call including any statements interested other differ night. contained about in and developments. update are those of results in that statements, the those the undertaking X-K to COVID-XX, could At guidance such statements should XX-Q. that call are discussed on filed forward-looking the call makes of on those we that party light

Timothy Mattke

want my Thanks, is and morning, to their express MGIC admiration to efforts and everyone I is coworkers, day and communities well. everyone. with good last unique fellow and by the coping to hope who their gratitude coworkers listening Their through families. my fellow circumstances Mike, in I have and over safe several and the support our for while local brought been own customers pandemic out day remarkable. COVID-XX about months

responsibility remote we thank safety So you. health we I housing not provide their while of The lightly. is first-time continue take work support coworkers a environment, families critical to especially a our in operate and and why the That is do to homebuyers. market,

we more few current results. our minutes Nathan financial and position. providing as business over prosper avoidance through to is think the and to call As working relevant that continue offering with I kick this of a current to will the focus summary the and results our GSEs among sources financial the position cover will our a with period, on goal second off competitive our other for high-level we navigate goal a all financial best spending servicers for We our we on of on this achieve and is through things, manage long maintaining strategies We stakeholders execute this to services some products by, and company term. unusual approach programs, particularly sharp a Then strive loss and the of capital. uses environment. our quarter the details by customers to the

discussing wrap up the state and open of reform will by questions. housing then finance I it for Finally, up

delinquent income the The loss from the increase get primarily Nathan loans in minutes. us we a to in details reserves in in in reported quarter. was net quarter that GAAP second decrease million. will As were financial established in that into new more reflects results, the response for for our quarters net prior few to income $XX material the increase

the for and During to despite quarter, been of purchase housing the very was originations demand single-family The increased second seems both has have mortgage actually volume resilient the robust. very and pandemic. refinance

low the many course, interest environment makes Of attractive rate very refinancing borrowers. for

writing economic bit. and mortgages as next the slowed purchase about As billion by we insurance near the That term, our was transactions demand several into MBA in quarter our for approximately with have as while business, conditions. there's back application indices approximately a And mortgage considerably remains April $XX Refinanced us lower will year-over-year. on certainty provided books and July wrote of or data, and the visibility X% our peaked combination NIW impact to pipeline of and existing over force months. the The persistency a a in less COVID-XX beyond transactions for insurance refinanced XX% uncertainty current new increased of percent a levels increased despite result, monthly lender new our the credit robust, performance in on May. reports XX% origination down business reasonable at in given

this be of with but in the characteristics. credit as We and for of book any capital market difficult it path growth Therefore, continue guidance XX-Q, monthly potential results in confidently had metrics. uncertainty As of provide insurance financial is providing uncertainty, discussed outcomes the that the or to we'll position. strong force further with performance, entered a our and period forecast business in result factors about we credit credit the will our that future to risk not or

Despite cash delinquencies required and June, $X.X that requirements a at low a addition, number by the held assets required billion. ratio, GSEs, be minimum the $X.X that assets private to estimate minimum in exceeded or eligibility robust end insurer billion available required the reinsurance mortgage are of loan PMIERs, assets of supported In our the the the by corresponding flow we under we sheet contractual a increased program. and increase balance in premium and investments, has debt-to-capital of

excess of billion policy our requirements. addition, In minimum capital state was holder the position $X.X in

delinquency in of XX% notices there of were notices a at received in our the delinquency the ended new second in us June XX% reported quarter quarter XX than Approximately XX% were June rate notices the delinquency as X.XX%. forbearance May. COVID-XX-related June materially fewer inventory first were plan. delinquency and higher While The quarter, to than

Although to the there let caused and losses, ultimately much encouraged remains pay potential uncertainty about our cure this and notably emergency, business impacts by activity. new the incurred potential the With credit are higher Nathan. it over me notice in we by July performance turn international that, for higher to

Nathaniel Colson

premiums we'll some of a mentioned. about to net are the premiums the talking yield and largest on spend declined net $XX our in will have profit of minutes compared what transactions. and insurance that our net quarter second on XXXX. The force. the the of per the share share same $X.XX Tim the of last XX.X uncertainties X%, $X.XX the primarily I from in which the lower Tim. decrease or in-force year. which Thanks, few income portfolio Net reflects compared per then we in yield higher The In to or and diluted income period earned second premium yield the from quota reinsurance yield, components. diluted earned losses several The difference basis of premium quarter, commission COVID-XX-related. points XX.X quarter, Net is effect in component rates was premium turn incurred to of and the earned result biggest is the net million share premium we earned driver the that to almost $XXX call premiums net second entirely increased quarter the the million

increase the losses the With due new were to in which quarter, the our increase the lowers losses commission. second delinquencies profit the in to in reinsurers, ceded more

what of commission I quarter, prior listeners profit they as call, very annual profit commission basis, had losses the years. no the is years. to for would the want In commission previous there earned remind normal our clawback in on of first commission, several as that level and an profit calculated While I we low I'm were profit is topic of been on earned,

quarter, March in year-to-date financial material as the losses commission quarter. As year-to-date which commission than a of as up in the a lower XX, XX ceded profit our in as June second the results profit second commission our profit increase of negative of was shows result in the

well. primarily influenced be we the benefit incurred the reduced course, receive profit will reinsurers. of losses the to that of did of amount commission periods as amount The losses Of by in future earn ceded are we

loans, strong net premium rates In addition earned cancellations yield on favorable suffered premium a was plan. the COVID-XX, to for and $XXX the entered borrowers insurance these year. home estimated to yield, had XXXX, the to in in affected refinance The was premium in premiums on net second notices last XXXX incurred received performance quarter for the performance $XX losses claim of second estimate second from and on that notices the second premium quarter of appreciation a quarter rate a Net $XX in million commission, an average last new single delinquent were price financial increase lower and our year. premium to XXXX the net loans of force. the earned net by million of the period million Accelerated delinquency approximately as the in compared reflecting influenced the of actual expectations we XX,XXX same policy XXXX, the the part In in of same have market. expected impact compared This by profit of and result hardship approximately period new a received $XX XX,XXX were quarter million premium X%. from forbearance

loans uncertainty we rate amount expected forbearance uptake a of reserve using the over. an we of severity. previous of that reestimation in the new increase million to severity the we of of of the received, in our successful mortgage with claim remains to delinquencies activity. there loan data, economic the period the about delinquent and Then, delinquencies. percentage to notices The of reserves claim level and established result current second best the new ultimate cures, cures of attributable reflect course, performance both including expected loss rate plans are great existing Of after loans. and $XX reserves, insurance claims loss approximately reserves and the ultimate our loss carried, these due adverse that delinquencies deal is When primarily and we expect of a claim workouts development, level associated delinquent establish In represents forbearance of in ultimate monitor on estimate net or expected quarter resulted of XXXX,

and loans of period IBNR We reported establish missed prior June of also by had borrowers year. an moratoriums of quarter the from the us. and Reflecting not to Primary the million close million. by as XX% estimated of inventory to whose delinquency reported in reflects that of from same the yet not the notices the To in of $XX reserve increased the us claims accounting XX, our to level losses reported June been as X $XX estimated enacted last IBNR that received the foreclosure $XX GSEs but period incurred, others, delinquency to delinquent. the number or the declined we but payment, March their nearly on had delinquencies low number IBNR paid occurring not reserve claims by declined from XX% million. existed

their foreclosure place. remain are the moratoriums due forbearance XX, August claim that of in effects the to to quarters and are next expire over payments several most modest we Although set agreement expect to effects

unemployment we the agreements, of new In to by will foreclosure forbearance to are increase cure and effects addition although encouraged expect we the inventory economic further, cause activity. notice impact the July the of and delinquency and moratoriums uncertainty

expenses. diligently other and continue underwriting monitor We to net

business. quarter business. to flat Before length any in in dividend quarter. to estimates the from and of economic on payments holding not the totaled request a of company determined dividend XXXX, ceding while after last company which be period substantially We quarterly they Future pay the previously that holding year, impacts the is severity about a MGIC of and our $XX volumes consultation updated second with or on considering of writing the reported second million commission, higher the COVID-XX the same MGIC did Board to basis in will the

And pays asked We XX before company. the dividends to to GSE's need Wisconsin OCI we XXXX, approval holding dividends the before also company. MGIC not object March MGIC holding seek will the any to pays of until our to also

Any the future disclosed, declared cash payable be a As determined the previously Board. XX. on share dividend of per $X.XX will company with consultation August holding Board dividends in

cash As approximately million June we of the XX, holding at had $XXX and of company. investments

the consolidated which is cash expense $X.X totaled and holding our billion, investments and our pretax portfolio was company. At it taxable a portfolio investment debt owns. year, at investment X next XX% million and is securities, a $XX lower million investments including modestly Our year-over-year of approximately income per was had a debt of the as of The the interest X maturity years, quarter-end, MGIC lower on Investment approximately is in $XX years. by larger cash primarily duration holding to and tax-exempt yield and that company yields. paid consolidated offset of X.X% XX% the mix

resulting a portfolio was investment the a for PMIERs assets capital gain Our million XX, in over XX, XX%, year the the a totaled excess end XXXX; purposes billion required million MGIC's ratio June had million minimum at At our debt-to-total XXXX; of at assets. approximately billion ago. second net $X.X available $XX unrealized of $XXX and quarter, and March approximately $X.X $XXX

know, significantly to required delinquent be are loans performing loans. COVID-XX. of factors assets you generally by the reduced based certain for PMIERs PMIERs has many been maintain a including to on to loans circumstances, minimum factors for and received. required for allows under The PMIERs related whether XX% As these claim of for us number required than the delinquent more asset mispayments

During between is in reduction the least become GSEs forbearance a the months loans for delinquent XX% is place. applicable X that clarified if at plan for XXXX, XX, X December and quarter, that longer and the March

COVID-XX-related the it our our of PMIERs quarter. increased Tim. million With reduction required our assets, minimum the increased delinquencies, cash result the and application quarter, the assets a of turn for to by that, $XXX positive of As excess nearly available which during flow me let in strong XX% back

Timothy Mattke

Thanks, Nathan.

topics. Before let political moving address me to few questions, and a regulatory

enacted finance be qualified GSE said, we at Patch. to that Based any, other The at mortgage FHFA the it the borrower's on conservatorship rule the also regulated comments appreciates is revised provide clear housing estimated FHFA effective if that structure our by of not rule, potential XXXX. definition less than debt-to-income definition XX% GSEs the What, activities. and of quarter, That capital a and some of GSE of the the the the relative work proposed capital June, company in would the September to system all private this changes And with the end MI continued XX-day to CFPB industry so-called GSE mortgage work the the of insurance impacted if an proposed changes the in market definition the to a the continuing the USMI April impact threshold. less and the changes During have is and for date comment is have trade that due the The is. have of did, with replace benefits pricing reproposed ratio preparing ends X, the of The targeted August FHFA will the as these review period proposed proposal association, exit point. at point. do markets the believe solutions. insurance to on

enhancement options unavailable, are While to borrowers and provide continue credit scarce industry the our solutions lenders, and or for our to enhancement GSEs. company other credit market

focused responses are we to the actively environment, housing discussions solutions finance to prudent current policies. in on we in be continue regarding engaged While

and solutions homeownership, continues timing to great the value mortgage the offers be any can future We encouraged payment. barrier term, proposition and actions. private our remain of the for role and will play include a #X of the continue gauge housing down Long to private we any insurance to the to insurance. company what overcome optimistic about may be finance. difficult taken and It to advocate including lenders and mortgage consumers that capital, remain changes use that industry for such actions in Private many the

contractual critical market; by and our the this employees, term. to as are beginning mentioned remarks, want the a In that of We the support to billion, underlying focused listeners positioning addition ratio, characteristics premium one, remind business supported I and $X a that company over well-being debt-to-capital to housing with the navigating of program. my to company XXXX. period uncertainty was founded I reinsurance balance current long in investment credit of has closing, to strong sheet a flow of low has robust our book continuing we portfolio of that an a excess provide at prosper in on: in two, and are our to be

from right We cycles I'm in options. have and with that borrowers successfully prudent quality the expect down low to through period operator, we customers questions. affordable come many to economic have With have provided our and payment navigate navigated continually that place and and that, lenders the team confident this service and continue to let's MGIC. uncertainty, of take we'll deliver have products

Operator

[Operator Instructions].

comes question Micenko. the line from first Your Jack of

John Micenko

cures, you the have ask looks XXX% do the trend you standpoint? of Can like full. sense to a [indiscernible] have portfolio wanted July out over either seem from cures as to total Do come loans think, or I of the a -- that have very sense guess, forbearance to I about a I any cure of July come good there, forbearance you detail? what delinquency much forbearance those of how if you or, level up they of

Nathaniel Colson

that We our Nathan. did kind working it's cures, that Jack, of notices of still the the the end but Yes. review July. put through are we on new process in of have out forbearance-related take information as I'll one.

to new the at don't have of this notices an So forbearance time. relative the cures in relative composition update to

John Micenko

the rate And X% this assumption for loss Okay. on quarter. drove said claim book the then number you incurred

were quarter. last X% I at think you

just But [indiscernible] the quarter? the through if outcomes going drive that that was Or curious, really a there was sequentially what saw something to be month-to-month to change? are defaults. probably true Obviously, different you forbearance, the curious improvement than of changed? So lot model it

Nathaniel Colson

Yes.

rules end still be. back the if you I uptake uncertainty the and about be of to the first recall of a think the would plans lot forbearance quarter, what what would

of lot a the gotten that through more has stuff formalized think I here. quarter second

the were -- that a from quarter. inventory now borrowers XX last the, to our there's from and to was I economic in I of June claim forbearance think COVID-XX, the it uptake And that those. forbearance benefited think think, and at forbearance that relative deferral slightly. given for the new payment that of related including have conditions the really, improved XX% So perspective, in have, options notices the But ultimately, may we on the list XX% the some that that lower rate of claim benefit rate are in forbearance and least,

John Micenko

I could more. just If Okay. one sneak

You're terminal thinking X the of are down -- what about level -- thinking in-force basis on How velocity? yield when you we points the money Where sort -- old of sort about money of that out. year-to-year. How do Is new at yields about -- we do and net XXs? to sort low begin Or it? sort of will at is that the a mid-X?

Michael Zimmerman

Mike Jack, it's Zimmerman.

reconciliation on increased -- offset losses, profit more to the press the right going that sequential we get of funds into put than driver decrease and I a had the ceded big reduces it's mean, accelerated premiums release yield, the in even When So the the be in can a that's But that look at ceded the you you though off losses. single quarter. commission. commission that nice because -- by refis, we of profit which the our see that. was

the of these going this the going impact point. lot bounce a forward. is other how a does go does of be as It's in and to yield develop it to, what function to like going where it we're does out be things, it losses to whats your back, to So -- looking

that notices, drive as might coming that's off to far happen going notices new existing all it. the into curers As in,

just long time. of over step to great -- due thought visibility, I term, that's but would it's Clearly, quarter, accounting it be this say in the that kind really the we of So the big would a all of where a losses. function deal was of down, heading

Operator

Our next the Douglas from Harter. of question comes line

Douglas Harter

trended and Jack's last on pricing of talked kind Can the last the about earnings touching and guess, call? during how I the increase talk that about you compared saw quarter to in guys point. you second

Timothy Mattke

we obviously think Yes, and I volume Tim. the be in to but our perspective, I long-term prudently force my it's mean, sure growing we value. premium that from of on continue wrote a competitive, And focused rates, this lot making quarter. insurance

about good I want but of get the return into think competitive to pricing. on that, I risk specifics lot sort we related felt of really don't a to dynamic

Douglas Harter

know do yet, it's of that Do might Okay. to NIW the And reported I market? but not or think share? your might kind sense lost where have gained a you you guess, compared have have -- sense, I everyone's you how to as that, a share

Timothy Mattke

wrote it's the the to to really I'd others know wrote. happy feel Again, landed of in-force think this in portfolio. about at we grew report, And the we say, point. that our I difficult all until with the good I tough fact it's know business But we than that we quarter. book really the think, where other we're business we exactly

Operator

Next Geoffrey Dunn. line question of comes from the

Geoffrey Dunn

apart break with to wanted reserving. bit I respect a to notices little new

said you non-forbearance in not. does the obviously, notices XX% were apart were forbearance now break think forbearance. of incidence, And right X% I loans? remainder that view versus your how of

Nathaniel Colson

didn't non Jeff, forbearance it's I mean, for forbearance loans. factors separate we versus Nathan. set

last at forbearance high obviously, quarter there, lower, forbearance we less So I the rate. very X%, little a with ended think a but

about claim don't in factor So way. don't -- that around think qualitative process really It's rates. forbearance the a the just decision-making becomes setting more it ultimately

it's unprecedented. uncertainty what lot aware, a we're just Although, most to subject of is I as now, given think everyone is right that of experiencing

Geoffrey Dunn

that's something so away, kind XX% around XX%? get when what that of comment we're if kind forbearance to trying a on or of situation, qualitative I'm read incidence facing economic a XX%, that? Any goes Yes, environment the is current is

Nathaniel Colson

Yes.

plans still some of forbearance. coming there's forward rate seems like curing months. some But should kind lot part also and people point. of largely of market in data visibility in point. the prospects that items the from on those on the think it things uptake what going from will from future have And that that forbearance -- the claim be of better dependent We of be or of I are I a although of the couple would next out conditions think broader there's non-forbearance them on economic what at the over are plans,

So it's difficult to I think somewhat say.

plans, second in especially I have think, quarter been to our out any the I want rate would specific claim higher. I into think forbearance future. not absent But to wouldn't directionally, number, the guide

Operator

comes question Next George. of the line from Bose

Bose George

noted for that? discount You forbearance PMIERs in is visibility COVID-related place on in after XX% that's happens by in What the the until place as place offered that sort is that? long end that Or is of year. GSEs? stay the does Or of there being as

Nathaniel Colson

Sure. is Yes. Nathan. This

in The really under be X months. think it all rule of work least year for will the kind of balance considered here, I PMIERs think capital X COVID-related, that the is of delinquencies you about relative clarified kind to for at in, way are the parts. will

for plan into items be haircut that those months of XX% continue the is a or a will X are data delinquency, that are the a while as use forbearance get of that the also like during period might to period haircut. haircut, has forbearance benefit on the we in going all out able they plan, the plan, XX% we first get plan, trial obviously, continue loans in into kind say, also clarified we to the extend those to now, But workout well. plans plans -- to I'd GSEs a forbearance the for that a XX% repayment period of So post And post-forbearance that workout would a modification loan clarified repayment period during, on XXXX. a

Bose George

ILNs, What you it guys attachment structures? sort see the And capital competitors, curious, do your are just that value helpful. a from on of that? the in of Okay, seen of great. looks That's ILNs of couple like was thoughts terms any high so then statutory some in I point we've ILN

Nathaniel Colson

Yes. regarding -- guess, again. Nathan this I is

be multiple able ILN that access encouraging MI see think, to to the really market. Regarding companies it's I market,

terms what think pre-COVID, attractive are think be I saw I the that's in is and levels terms the pricing not points attachment to of as we expected. but

seek as evaluate it maybe think We risk mitigation about capital. the for structures, I or attaching and purposes we sense. to would being if made market that could think, But other things PMIERs continue thought to very those do other you than high

just some little So our value program pretty while, ways of we that that there's competitors, the we have I large mode structures in there, than of our than remind kind hasn't is have little who a that quota have. a been do and different think, primary more different used some a share ILN

Bose George

Okay.

books The sneak more. me the Let one delinquencies. seen you've XXXX a in just 'XX and decent obviously where pretty pickup in

what LTVs on the those So are books? mark-to-market

Michael Zimmerman

is this Mike. Bose,

the back forward First give the books. that less off, you I LTV the in delinquencies and call, mark-to-market 'XX and maybe those book. we'll did we that for my pick of don't up saw during significantly but course come than the have right at fingertips but here,

Operator

line Your Mark next the DeVries. question from of comes

Mark DeVries

How forward. think should incurred we going impacting about losses ILNs the

breach incurred which point some delinquency loss If that your notices, there starts of is to reinsurers back at you new bring have down you notice to go continue risk? to threshold kind the a levels new the start elevated of as per on

Nathaniel Colson

Right exactly retention ILN now, It's deals. losses those those that on are players any still on the right. experiencing No, within are incurred loans Nathan. transactions we that's covered are that by our

ceding on an to begin incurred losses If the basis attachment absorbing point, the it losses point ILNs. those we the losses cumulative get would where incurred the above we were accounting the to So there. are did

Mark DeVries

of incurred delinquency number? have general start you sense to a of do rate, driver And of what Okay. a we'd the kind see meaningful that become

Nathaniel Colson

that persistency given looking the some what because you're the I are loans rates, to very something would expected at quickly, off don't just those deals those X% attachment think in number, right I out terms pools an above, the they'd given point be -- think of and have at expect, been say, know but have kind would say in closed fairly don't don't effective is of double I I prepay. -- exact have running had, what it's as But I I just we've to delever relatively now future, I'd point. check of they've high. loss the low continue I --

Mark DeVries

I And Okay, on just incurred annualized there's determined the is paid got indicated basis, on an that then But or you think, and commission, losses those clawback. Nathan, are claims? no profit it. done that on

Nathaniel Colson

It's incurred on an basis.

on of it's accident kind an So year basis. a really

notices we in the a loss calculation. ultimate The So associated accident year. associated given with losses of the number those have all with becomes that

Mark DeVries

Okay.

down rate high to a extent back? that claims which money you the notices, on to so that developments of -- there the assume are get because don't no these too there's you favorable And new line, maybe

Nathaniel Colson

we're No, assuming, now, if we would. very little, has obviously, in of resulted paid this claims. any, Right

is reserves this incurreds high too loss commission out receive ultimately those if at are and we more this are would higher, would If profit So profit reserves to be reserves less losses primarily ultimate receive point. then too losses turn and lower, are we establishing commission. -- low just If

trues within it So year up, construct. but the accident really

So on estimates it up a continue but any based XXXX true kind of to ultimate year, of stand-alone revised is we'll losses.

Mark DeVries

makes That Got Okay. sense. it.

Michael Zimmerman

your mark-to-market want to, question the circle LTV. on Bose, back to Just to answer

they So at there. level, done the you CBSA right? comp, So right give the

really those or for those real at probably mark-to-market -- and book books, LTV all CBSA back on and look old from than at for is really the XX% significantly X book less 'XX looking XX level and You're you probably that lower. frankly, prior 'XX quite below at the the years as at

Operator

And line of Starr. Adam the question comes from your next

Adam Starr

back? you And rates for the firm, of get I their loan all been mortgage demographics if holder and and on the the originals reserve? what are Housing assuming money guess, gets tight prices the the have because supply. of per interest low a loss Do recovery loan? part of you What happens quite

Michael Zimmerman

from here -- Sure. Mike It's here.

loss $X sale what So property, what's if for there is But no claim the or would submitted paid the mortgage gets of owed the them would likely then by full or recovery claim the borrower, if insurance. no to submitted call on claim. the to the there's of then the the lender through insured property most be us would we it it be would if us, not be

Adam Starr

its for loan? the more of and sold uninsured balance foreclosed -- the amount of what than But the

Michael Zimmerman

to few the from years borrower valid any few only Quite get list technical doing that to that states, that or resources frankly, they ability there's any where of I'd go because back recovery levels. over what comes don't go and there's states So the experience have the has. quite of very after the those if little the go you to borrowers where And have there's frankly, kind borrower term, have asset to ability there's a to we've and seen them to our assets the see in of get to a that, borrower. the

Adam Starr

some lender settle the balance? back do the at and forecloses get lender part Or more you not insurance -- if the until is the claims hence What claim the Do up house you than sells of pay the uninsured outstanding balance? you property sold only paid? a the for of had the that and

Michael Zimmerman

the Yes. Title to to needs transfer us for claim. pay

been whether if whether lender, acquire -- have would versus claim. because then or took there title, we and So time, not was claim have lender if there a we If evaluate loss right the the assess paying would we or at to the property that though, and not. the a a submitted, foreclosed

same things they be geez, The property will seeing that foreclosure. property the be values seeing didn't the are we sell and would the lender oh, to avoid say, the foreclosed. that, up, So borrower

to the and have hold. we that So opportunity acquire

And so we would if that one. reduce our loss did then pay

the So check and balance that's there. kind of

for the right and if loss. more We that sold acquire reduce have be the property could to it

Adam Starr

you. Got

So total when the a default your insured reserve -- the on you balance? initial up loss assume but you notice, on set

Michael Zimmerman

quarter, so New But And X -- some loans a last severity, assess of if the delinquent like -- it's in it years. severity. XXX%. claims like our those what would X With we be. around severity That's would are in very paid high York, right or that yes, was that Jersey we this New were

Now coming so. probably see because we're much we more or paying recent less XXX% severity. XXX% price claims appreciation, in More than of

the established reserves. we when adjustments those make we So

Adam Starr

rising do give house then lot loans? on you prices defaulted Okay. a of But protection

Michael Zimmerman

Absolutely.

Operator

next Stefano. comes Your the of question Phil from line

Philip Stefano

back understand, and capital I struggling go the in to I've the I thing requirements with. haircut wanted guess, to XX% been just X

this that in XX% have is in into on an capital As forbearance kind duration the longer, there to the program? mortgage? locked then X- are of of haircut And gets the the we requirement time Or you over forbearance capital that applies? the increase requirements X-month aging

Nathaniel Colson

It's Nathan.

right factor and had based PMIERs the XX% delinquency. in You applies on the underlying it that is haircut saying time to that

haircut XX% the while which loan it's the haircutting So by continues ages delinquencies. to the increase, apply, factor continues to in as

of by indicated ages, XX% amount does but just the less required So go the not by than -- full would of full capital item be amount. amount in by as what the PMIERs that up

Michael Zimmerman

step Phil, it as claim, quick out that before that it to to just to XX%. right, And X And moves to then when X a by it And think goes the I to gets goes time category. XX%. up first reminder,

incremental is move. step-up capital, yes, cap incremental in there the comes that but the So big first --

Philip Stefano

Is in on and understanding we seem world you this also shelter least expense salesperson? stuck as Yes. could your you there potential to the were case. in? people the at the at any the be falling quarter of flat from you no, off the of in anything next in want a home But whammy as had Part to I get and there just of of double the they can't not haircut, was Was do makes get live my but step-up that's I this, don't benefit salespeople risk summer, talked place that When you point it right? be fear getting benefit the doing gross out like in what sense. being think million $XX myself, doesn't us of about a Or can ahead expenses that to road, aging a there year-over-year.

Timothy Mattke

are say, I not us, I a would I But for marketing Tim. savings it's travel is is expense. obviously, expectation that's significant. mean, that, some for modest. This from and our there, there would us, say,

Philip Stefano

it. Got

Okay. the to question that earlier was And one profit on going back then commission.

basis. that a it me that sense year-to-date in makes think I it's to done

year, get XXXX I I question a is or XXXX, not development year there's on was, for was the trying there at either that of right? reserves part big the -- this the wouldn't guidance, that in but if next to that commission if asking profit favorable impact think number what for comes huge number a favorable development

Nathaniel Colson

Think about years. about So the accident again, years as think this Nathan. the years as the -- accident you -- is

profit new we losses, estimates the estimates which that And updated So of second the our for going be through XXXX, to notices are will say will losses, to those as impact XXXX of of to accident continue quarter the ceded flow associated ultimate year. commission. the with the update

a like is contained a there's it's true-up, year. -- accident So but there within the

continue where So profit any profit notices on losses next year have the development and will received in commission don't XXXX, the the to ceded But commission. impact for true-up both losses we XXXX. that we

Philip Stefano

this differently, Did is all Okay. commission saw Maybe that XXXX at on we've seen losses. on the based XXXX adverse ask year? adverse it change the reserve we development potentially to which development profit year, this the

Nathaniel Colson

that with with deal, But don't associated loans be to by that have then reinsurance have adverse look of were lot lower -- was the percent. of development which deal in to weren't did reinsurance, exactly less XXXX ceded adverse losses adverse was a of assume share kind there legacy if a but in profit development more it covered went the I'd to yes, you likely by that, most book our that know commission the -- were amount XXXX. down of in the would or at of years, are that what that I is gone on attributable was at terms that losses the and associated up. part That's quota loans type development

that example 'XX coming my was the from that just we So XXXX. think illustrative there not was development

Philip Stefano

sure no, perfect. it, just wanted mechanically No, and I'm that's to make understand I

Operator

Klipper. comes from question next your Alex And the line of

Unidentified Analyst

any rate down, and know it your your I of down versus X.XX%? the things actual you like was of what on July one meaningfully. But guidance went looks end delinquency us Can reports competitors' give it delinquency came rates.

just And triangulate that number so to trying is. what I'm

Michael Zimmerman

Mike maybe because or maybe just just few month. Zimmerman here. declined it's the a so It probably loans X,XXX outstanding, inventory one The more units. number points basis of down ticked about

So up. went that

would or down we'll tenth dropped maybe guesstimate $X.X around get of So be try I'll million, and maybe which But so. my we a that that inch up number. --

Operator

Bhatia. Our next question of the comes from Mihir line

Mihir Bhatia

just with you related they that Firstly, But a XX% start related of loans and cetera? statistic COVID want forbearances already COVID-XX I to loans potentially to there I is payment, delinquencies. delinquent are can forbearance. other the appreciate another et forbearance way what that reported what miss percent so the going delinquent? like is share are And if of coming could your be

Nathaniel Colson

it's Yes, Nathan.

for while GSEs on forbearance I it's for robust reporting reporting loans, typically, get loans. -- think as is than more delinquent servicers as performing and the we've do certain And the information nonperforming loans. get loans for our from robust we performing we not from

on I one our number, but on So it loans I so would given maybe for isn't nonperforming level reporting jump little other performing feel the same think that not that that of at as a we we're is just good cautious have think a the typically side loans. statistic, number strongly about not --

Mihir Bhatia

Understood. No, I appreciate that.

year. the So unemployment economic you're we of that? your rates, is XH, telling data Or there I half that's just I seeing into wondering, as it the you given increase go high guess, I expect more second the into to just you is et and the cetera? And delinquencies think, something mentioned environment was you in

Nathaniel Colson

be some to things at heard. seems we've certainly that this I are that economic to And Yes, it's we're refinance. Nathan. of also either the a by I think that, uncertainty These do maybe entered items forbearance still July feel curing didn't or encouraged forbearance to or at be anecdotally, think least is -- but that there results there were want in like are point. lot

peak, inventory the -- ultimate say, quite uncertain. the delinquent obviously, is of let's So

favorable think in what just about to being I feel were July, as for thinking certainly upward thinking. trending the seeing we certainly results I but it still that's were were, we we where July like from

Mihir Bhatia

plan. that COVID-related first will COVID-related discount forbearance forbearance get [indiscernible] actually that a talking I'm period. get Understood. like Is and if one the PMIERs discount. of apply just loan sure The months throughout X COVID-related If make just it's just not correct? on XX% you the And this final to we the is the forbearance. want question. a XX% in right, I

You the for will forbearance. Is COVID-related discount the right? that get entire

Nathaniel Colson

correct. That's

such a forbearance continue in the as the For XX% the modification, during a period get would continue a it to that XX% the as it trial repayment workout, plan, were on long we as if post loan, forbearance plan, get we haircut. to forbearance in as post period or haircut remained would And a well.

Operator

Instructions]. phone [Operator from continue. you the further may No line. Presenters, questions

Timothy Mattke

out for Okay. Thank Tim, you able I This interest, everyone and there. safe is great healthy just their everyone a to hope day. to stay thank want again, and is Have again.

Operator

this call. participating. gentlemen, today's conference for Thank and you concludes Ladies

now may You disconnect.

Michael Zimmerman	SVP, IR
Timothy Mattke	CEO & Director
Nathaniel Colson	EVP & CFO
John Micenko	Susquehanna Financial Group
Douglas Harter	Crédit Suisse
Geoffrey Dunn	Dowling & Partners Securities
Bose George	KBW
Mark DeVries	Barclays Bank
Adam Starr	Gulfside Asset Management
Philip Stefano	Deutsche Bank
Mihir Bhatia	Bank of America Merrill Lynch

MGIC Investment (MTG) 5 Aug 202020 Q2 Earnings call transcript