MTG - Earnings call transcript Q2 2022 | 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 2022 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. I will now turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.

Dianna Higgins

Thank you, Roel. everyone. welcome, and morning, Good Thank you Investment in your interest MGIC Corporation. for here very call this excited am today in to seat. earnings I first be as my is the officially

for call Executive Chief and Nathan Officer. discuss on Tim Financial Officer; today Chief me quarter are the our Joining results the Colson, second Mattke, to

results available refer MGIC's additional at website mtg.mgic.com comparable during Newsroom, includes which Our financial It a was our press contains also release, will issued measures. GAAP financial reconciliation on results about that our the call. of quarterly information quarter most to measures second yesterday we and is includes their to under non-GAAP

reinsurance In valuable. information addition, our force, primary website a posted written, information our in pertaining and may you quarterly transactions, supplement other find to on that risk contains insurance we new

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

want we during I Before of everyone of these differ our Actual about make the started course materially call, expectations future. that contained results the get we forward-looking in those comments could may today, to from remind statements. this

call to issuance have to light our such are that about differ from today, at results than With undertaking future obligation the current the we If events. the XX-Q. in of the discussed statements, other of are actual one Additional statements now the or forward-looking call we materially forward-looking turn XX-Q call our I to could of that not in are an also on to guidance the X-K any in or statements subsequent yesterday. the No filed information over pleasure those and contained fact update this and on factors Tim. rely X-K were that, should cause time that make those any the time

Tim Mattke

quarterly make transition calls. And Zimmerman know lot want Dianna role, investors report great and through you new I I new we as getting our Michael results to know before time that, the first interactions. seamless to better possible. with I'm to delivered that know my that spent you your I to the we to shareholders. Good to role as morning, in and you I welcome our great to in that year everyone. matter, financial quarter the With continuing start a had exceptional forward the prepared I a do remarks, pleased you half for look to chance return capital while as another of of

into we flexibility, and increase leverage in this get throughout our in common this all an stock a equity. decrease XX.X% earning ratio while But return details call. summary, insurance on dividend, annualized quarter, our financial force, and will stock, We grew repurchase our paid strength

us the offset including X.X% persistency the and by Taking The good low the of to early number positive encouraged strength attractive, are net loss capital of and GAAP does In look insurance flexibility prior written. for a offer capital to company, we be at negative conditions We in performance our quarter, strategy level return of in-force holding reflects the the in are on growth to trends. rate This force we growth than The our a at deploys X.X% order equation ratio to in in billion, force more business business quarterly income. more are of environment, loss a established insurance in the the employment our and new million maintains near-term the $XXX shareholders In capital of need lower just about writing XX.X% We believe insurance the the ago of by position are in quarter, credit low offset we a losses default, payment stood of increase believe MGIC, quarter continues that Insurance portfolio, positioned the quarters. future are future. experiencing, the can and ultimate indicators that. at end the reported trends company, by volumes the reserves continued credit we current favorable quarter, to which excited the that year and of management of earned of achieve $XXX the risk-reward and a second credit reflects we a re-estimation quarter. during quarter. in increased and our in in financial from both the in the that succeed delinquencies forms. increase to objectives current a excess variety a was new than delinquencies performance varying

As debentures of payment the our common the and capital Bank dividends. shareholders capital stock to deployed our leverage we capital strength ending to We amount Loan a and a common of our of new junior flexibility XX significant of ratio through result during repurchasing reduced while business XXXX in the of our return we and advance. repaying XX, June significant of by position, months our by Home expense due Federal interest convertible and repurchase portion stock a MGIC's support

due amount. share XX% redeemed $X.XX paid purchased on dividend be stock this Board our per notes we quarterly of XX, common in year, common outstanding increase Additionally, and to XXXX, dividend additional in the we in our stock, August a authorized July senior a

it detail Nathan on management to the our to provide Before X like capital more I would results financial environment. on activities, to and thoughts share turning over current

in in due activity. decrease to been the have refinance First, interest consensus mortgage origination the increase lower forecast and rates trending

remainder the new activity the than expected is private to year we continue market purchase strong remain lower low although of smaller opportunity insurance the expect than the activity for be refinance this for mortgage the of last. Overall, year at beginning We to and year.

new continue written remain our insurance record volumes will insurance expect strong. new years, to last for to anticipate we X While written below be the we

MI forward, demographic As we meaningful look trends suggest long-term opportunities.

well mortgages, whether is mortgage to business MI lower in interest to the rates. the monthly built to first in their incentive borrowers increase changes or rates many The payments. tap believe hedged into their of refinance interest in equity materially reduced has we Next,

our revenue. reinvestment rates, has So which while our written portfolio, in-force, the insurance although X In unrealized the increasing, the yield. resulting long-term it environment current is rising quarter, rate result slowing, low is in trend investment that portfolio in of our stream. reversed drivers interest insurance extending in insurance future second Persistency, force interest but Also, grow, in increased a in losses was pace. our in our slower of with along the continue has are new revenue the persistency to existing long-term is investment insurance force at increases

or in increase presence there Additionally, while is to for values, the increase, a those if home there's reinsurance in decrease losses of will help potential an unemployment losses. mitigate

We that over of market. is Nathan. the strong to created being price be markets the home the The This even appreciation are some some normalization claims several that, believe over X the over depreciation the declines. that due years the for down healthy may homeowners. combination price many rates price turn Lastly, we've and home primarily slowing signs there seen years, low price home housing said, may gradual equity of and demand. for has of last related on incidence last significant to reduce historically With it mortgage finally appreciation equity see significant home appreciation should mortgages. let That national me

Nathan Colson

Tim, morning. Thanks, and good

income, has This result value per per book increases unrealized share common Those interest on that unrealized from amount of reflected adjusted December reflected are million investment $XXX as mentioned, share share increase. increase in and the million year. losses earned the in in was unrealized portfolio second reconciliation the income we therefore the $XX.XX per quarter, outstanding from the On June net a last the or our Despite investment of adjusted $X.XX per quarter rates, losses diluted and in strong decrease XX% share for portfolio. We Tim earned diluted the the income In period results net our had second in diluted per quarter year-to-date, first disclosed and release. we As of not $XXX net strong losses are be in $X.XX net of but per share an basis, XX found regularly or income shareholders' in net to share. quarter an diluted of A GAAP during to $XX.XX reflected net our in equity book the financial our operating of year. per share can the income is caused to solid in also decreased earnings gains which value half book we XX. net income attributable compared same XXXX. $X.XX of as detailed primarily value and operating income to to $X.XX of

interest Tim the mentioned, potential of As rates higher investment earnings for a positive are the portfolio. long-term

However, the per several interest the losses at quarter. rapid resulted book rates by increase over the end value in in share the months of reduced that unrealized $X.XX last

XX, value book by December gains at unrealized increased share While per $X.XX.

the by to total revenues quota points the The the force earned last in a quarter year. a basis second was tens year. were quarter year. and the quarter, million partially ceded second same force discussed. was year. premium share last in $XXX first The Net for net from down seven $XXX in premium earned $XXX we basis compared consistent XX.X yield point in During decrease the million six the premiums of quarter with $XXX premiums in premium compared was down for our points, second a XX.X% trends in yield. in million XX.X% basis were in XX.X the insurance to was tens from down yield in of quarter, last that to compared from basis transactions, and last quarter increase an the in net same points offset and our point quarter period The quarter quarter last to X.X due a period decrease basis million have increase decline The premiums previously reinsurance the for the

negative Net the $XX losses in million to last same for million $XX Turning last to period the and second compared quarter credit. negative million quarter incurred $XX year. were

insignificant continue as $XXX to of and loss to second on compared COVID Our first XX,XXX the related in peak to of quarter review delinquencies reserve cure ultimate $XX loss delinquency in decreased the expectations. XX,XXX and peak delinquencies XX.X% our straight of have inventory decrease exceed loans, from quarter, the delinquencies those we of XXXX. marking expectations, second million the eighth of quarter our the quarter resulted in rates quarter favorable our pandemic In of in and development the adjusted development losses development the The by prior quarter in last favorable development pre-COVID was reserve favorable reserve loss loss re-estimation to ultimate million primarily year. on

New remained The flat during the continue moratoriums delinquency claims of decreased increases. in activity for the XX.X% cures quarter; received activities. however, quarter compared by the continued end to Shifting as outpace relatively an number new to as claims our the paid management to gradually quarter. COVID-related notices foreclosure paid grow to and come foreclosure quarter first notices to capital to and and eviction we the expect

and Tim strength for of company. highlighted, financial As writing deploying our capital and holding to the the growth company priorities maintaining the include flexibility

dynamic These the excess means a operating expect excess needs. target growth PMIERs a maintaining will maintaining of change enable The are in it company, of For company, environments. we means near-term changes. liquidity level target environment levels of this holding as robust the that all level operating and operating in

our $X.X in in traditional we discussed in addition XXXX. for information transaction, of of we the More as our in the another under the most April, to reinsurance the market, Approximately in end at from This billion quarter, risk-sharing for of flow transaction in written strong PMIERs reinsurance $XXX ILN of reinsurance our primary be dividends the in of of payment the XX% we the million transactions was of in the XXXX Also, reinsurers our and protection the primarily in the place can end, minimum by a part transaction of transactions the a most holding supplement in excess liquidity of layer benefit PMIERs protection. we offset executed growth provide transactions compared which had PMIERs PMIERs policies covered growth quarter increase requirements XXXX. is holding These treaty additional As was covers by policies loss an which at MGIC's cash an of and excess beyond required on company. capital will NIW. MGIC excess At extent company reinsurance to of the have some panel force written risk minimum excess activities the the assets quarterly our of quota existing of operations, to management runoff quarter. $X.X completed billion loss share in strategy through last loss to second the force, risk we found last driven by to partially our year. quarter. the a of with credit to cover December from June excess on and relief had quarter, capital due

As were highlighted, capital and holding the levels above XX, at position June capital targets. ending the had the robust during levels Tim at XX months and the company MGIC our a we consistently liquidity

level, holding to capital repurchased MGIC stock for million of company in At with consistent and stock $XXX dividends common As total a million a paid common holding XX result total $XXX million of shares the strategy, dividends $XXX a paid our we the our of to shareholders. in million company. cost and

approximately the We expense AX strength to a million principal $XXX XX, annualized improvement mortgage that and reduced to our rating shares reduced since or $XX to senior potentially also XXXX, million used Moody's dilutive ratings stable in and the MGIC's debt insurance rating interest our BaaX outlook. insurance upgraded debt-to-capital eliminated ratio financial our reflect in stated continued and to with U.S. of upgraded This me discipline, debentures leverage debt dilutive financial XX%. $XXX Moody's in and Combined, million. position our $XX our approximately Tim. amount XX XXXX. shares repurchase due market to million let it June convertible reduced program. extensive and and by by reduced strong sector, from reinsurance July, maturity XX% In that, profile underwriting we've back million in turn our over With the XX%

Tim Mattke

housing. pilot and we agencies housing. to these housing in public and maintain test and to encouraged to the that to had of continue each provide to questions. learn open about of point, of industry simultaneously Thanks, half the plans industry. and enhancement the I engage the framework and the before the At various to federal and credit closing, housing up requires are In the to company these publish uncertain what private housing the continue role GSEs. agencies government welcome will plans and insurance MI advocate announced any, We this affordable or of can GSEs will have efforts FHFA with transparency continues for borrowers increased flexible as remain other the a the a impact, new year. The finance. access strong focus GSEs and play we lenders, these sustainable opportunity on its on activities plans. we GSE And further list first we topic for framework as pilots additional the June, to housing comments our in efforts Nathan. on use equitable for This website. accompany the the equitable if and of on future access A quarter few successful solutions through the to market policy it another promoting we released mortgage GSEs always, To finance a

As rates forward, are recession. and there uncertainties risks the inflation a we of rising look possibilities increased interest and about and

providing risk-reward the conditions strength our market model the trends business and employment of housing and helping to fundamentals sustainable success. our housing and flexibility sound. on homeownership accomplishments. Together, and market families like believe cycles. cornerstone the XX achieve uninterrupted and that equation continued have the remain been will all business in Throughout years, focused our this executing our of positioning and offer contribute we affordable current economic strategies, in the our remain our support individuals We critical to However, that people our and

the commitment is dream and take operator, to as as With home ability Our help achieve that, ever. -- ours ownership let's questions. of strong

Operator

[Operator first of Barclays. Our DeVries Instructions] comes Mark from question

Mark DeVries

were if they observing? things you're and pricing commented and of what you have competitors pricing around similar doing your of anything Can few you're observing comment from competitors. of what A selectively increasing that kind kind here on

Tim Mattke

too the don't are of to always capital to We last as looking is way selective we're time, we and Tim. think like to we've about quite say, frankly, safe a I think deploy what period it's in in detail, it's over pricing. But especially return. Mark, talk much at risk good our done

I think price we're trying it market the is to and to be really alone. conscious about in what win the what takes

the that sure we we market capital. there price if different shift the sort And think deploy so to is the make of evolve, to I segments look when most we're think And I to potentially. can we getting opportunity our to continues

I So course of quite, year. that think being frankly, will consistent over that. And I continue evolve think to with we're the the

feel bit sort we really think there's to want a safe about loan. I pockets that more -- where the that I upon risk-adjusted say from overall of you environment. those think it's But might good features based basis the of little a return

Mark DeVries

Fair And forward? repurchase or is a of Okay. debt-to-cap us up kind mid-teens target? ratio that the $X down? could kind in -- of reasonable share to you is expect move more also, that longer-term did that for should And you the then million quarter, enough. we cadence see this is of going Or a new

Nathan Colson

Mark, it's I'll those. take Nathan.

that on here thereafter think largely And in think targeting debt-to-capital we debt-to-capital the low are XXXXs I I kind of July. we've in retired we're question, mid-teens. ratio to for we time a said some the the

try delevering in no XXXXs. activities the to So other to term, additional continuing than the fully near resolve

in going think I activity, plans there. longer and that's really afford for above position for we think with funded why if request the operating are going But by the like increasing quarter, be given I the circumstances be do. we've dividend in said Whether are future. year, time we want capital I future million. still in get quarters, are really don't our to that been on evaluate above some to targets. dividends totaling share operating us our requested is to because we'll $XXX we no what dividends as over repurchase the the there. million I last think second current we've levels it take the liquidity are answer and holding Relative levels in the some to that's to later from on levels will the our things term, company, when our and facts paid what capital We we debt where appropriate pay that's be a and the and have additional the ability dividends the But the dividend in that target comfortable action capital we At partly dependent near-term is third target. of -- quarter. amounts from X company, does our the that to our conditions, $XXX They time, the think we we're take which expect are right company what

expect, as as that We view to said. to we've So money largely return we shareholders. still

to both had, shares And July. kind that we that another the dividend to of continued we X.X we've shareholders, with increase share in that the here continue the repurchase activity expect QX. So programs with also million into but disclosed in

Operator

comes from question Harter, Credit next Our Doug Suisse.

Unidentified Analyst

on Kochalski] for [John Doug. is This

about of the names outlook around is just premium kind also the X.X on what have yields. were rest the up move. influenced question And to quarter, down thoughts curious saw bps First about quarter. while your I'm is your other yields might this of XXXX? were for We premium what then net flat about

Nathan Colson

and typically like guess, force I'll the to in something company, just a initial expected Nathan. had about. that. guidance the commenting the it's number premium I John, basis we've on we referring That's I'm that take talked a point yield. here quarter, for was year our

what QX. are and premium tens better in moves seven that I we in think of a down yield were of six than premium were were point QX basis the points a I'd force around a variety basis tens hard predict But we expecting. net to for quarter-to-quarter. those say of the factors a of little both in on yield,

yield. have probably quarter than consistent think, expected. would for looking the versus like a in where I more So X in the little But of points for activity bit decline it's is X what or better basis decline full the thought from year, the we initially would I us in-force a have we think premium

Unidentified Analyst

it Okay. forward, activity second HPA, question. And going given better positive macro expected cures than then COVID-related Reserve but and the environment. of kind with Great. also was

the Just as curious activity rest about concerned? year far as your of thoughts the is reserve kind for of

Nathan Colson

Yes, I'll take well. as that it's Nathan,

time. end reflective us the pretty I with new some claim we're reserve for forward. end going For this driven this where development, the the conditions XXXX from of again reducing been our notice and quarter, year activity. expectations, cure the new the be And will our to at that's third think resulted consistent we've loss our that Relative what are notices, prior. something of fourth goes particularly been That's certainly rate by actual quarter, of that and of around far has kind notices expectations quarter so in outpaced ultimate

as that in something our If terms will line continue that's quarter. not next much the we'll we our same see of that than ultimate that's process there updates. see again be expectations, expectations, to in to So activity If may better with update more in losses. we result activity follow

play So we to approach still the for have some but same follow out, that's that some time. of we'll

Operator

next comes Our KBW. Bose of from question George

Bose George

think peers. -- came your any movement better there also, this share NIW some than in in a And any Your was of have bit has the seen market might you done mean, quarter? we've I do from that? bulk increased that what is there

Tim Mattke

the that Yes, explains that. anything Bose, it's market I don't Tim. think in really bulk

does report. of to a range what MI as little in. share been quite really look our I might the It of as the up years last consistent, we've been far think We've there's bit. couple over be like still X frankly,

a I I the So pretty while in quite couple of be frankly. we think range consistent like we're might said, from quarter, a up last, over years, bit a last little

last the comes deploy we would I of overall, look returns. we'll we think when think And competitor I But getting it's and where we're we think expect. the capital, see we what good whether in we're the obviously land. out, So zone to

think mindful share feel our comfortable with operating of we've range we're in. really I been the but overall,

Bose George

quarter. on And do just the common dividend, Great. sort about there the Okay. a how the you a Is just going How of payout? this philosophy about then do forward? think that think -- was actually increase common nice it Or dividend? you on

Nathan Colson

I'll This that. is Nathan. take

couple I of One, of with the of come factors. think payment to there's dollar number down. a shares the that we've the repurchased, continued had dividend

it a than basis market on a a what's a more than basis slightly payout So think of look is changes the book yield XX million year some to but that now. because just given the look fewer that little towards I both back and also there's were levels shares the getting book above, market we more yield just at yield more we from like ago, But a just does. the

wide it's about I targeting that So continue less feel pay with ratio, of to dividend we comfortable a more can scenarios. a about in we payout think ensuring but that, range specific the that

about to dividend XX% something So the increase the well. continue and I I and But really look good happy for that feel think pay now, at think, the as continuing over to we'll that's going time forward. that increase, dividend in about

Operator

comes final from of America. of Mihir Bank Our question Bhatia

Mihir Bhatia

of on for potential just pullback slowdown a to A about a by wanted couple housing. that. bit in talking I a or start questions just the maybe little

potential all -- there you on that you're which gives But you're then And or underwriting an you at are for be like geographies makes characterized would seeing side decrease. you that segment, you as anything where are HPA from anything pause? to perspective the seeing doing anything tightening maybe credit that back? maybe any the for first, Just, pulling mentioned --

Tim Mattke

it's Mihir, Tim.

decade mean I data still credit I a seeing nothing that standpoint, strong. a see point. to think for that standpoint us anything this there's the underwriting I really exceptionally exceptionally we're is leads been over from believe It's box strong a at from there.

price, to HPA, think to But the HPA starts is it years I don't that we insulates don't again, little think bit. so price, right that talk believe you When we couple think, quite there. we happen. again, HPA And last now, moderate. a HPA makes that we see I assume of about I When anything that that saw sense and going frankly, that, we we

we more think So it's some in how markets If slightly down, it with safe line I it price. back could it's coming think to does when slow we about assume negative. go

I think that But impact mindful try it's return think risk factors look of we go we rate basis, pricing. everyday to need we at to we be when need how about and the and that our the to of on the all I could business about overall. loan think we're get what

the better rate that's the we by But any that's to us, raising that much not for I nothing be that me over on overall environment great So we're long of for But in frankly. said remarks, the in saw my an at pause means gives housing HPA years. basis. last I as think back quite couple going run, the opening and in

it. But at nothing in this point. that pause And we'll mindful we our how of approach tremendous us gives and be pricing so it

Mihir Bhatia

And coming still trends, Got and delinquency [indiscernible] have still benefits on Or seeing? then normalized That's they just this helpful. maybe like staying it. some we the pre-pandemic theme through? pandemic like from getting now? this what similar Is are to you're

Nathan Colson

book Nathan. the in look notices Mihir, our below mean we're quarter number of receiving, new number of terms pre-pandemic of new for of the in if levels. you at I this second the Yes. it's it's I notices year, that think

delinquencies. prior book continued run those of Some still off, of that was XXXX is kind to new naturally pre-crisis coming our of down which generating some as and

new quite levels. favorable think I even So the continue trends notice new be to the delinquency to relative trends, pre-COVID

Mihir Bhatia

this is my last question. And

to Just get back the expense. I wanted on

-- upside, for guess to upside bit -- seems little year? $XXX earlier on coming what's line, be should expense bit bottom might to a a I'll year? that onwards like for Or investment of you little better. on that that are we maybe just year bit you have bit I a guide of on the a And an could a trend ask XXXX in down One, full there it or I topic, million think have had a X-ish? for is And just XXXX that downside full in guidance be given follow-up there? year. ratio in thinking expect the pickup expense Is expenses, I'll your on we little

Nathan Colson

Sure.

be So But is that of we making, right to trending think we're that guidance in of think I is, We investments the it, the end we some now. that still that's timing to the think too. XXXX, appropriate. specific still gave might range I relative certain towards lower

over kind the of the to the think to years, that of got start is going over going make Right meet 'XX, we think we've right to to forward we down those the next time. make -- update returns. of good beyond said investments this at that I platform wouldn't of a runway and I that have in point. payback think investments kind we'll what year. we that, continue think that are good reevaluate Relative that do trend point, So But do the that to we've now, we'll platform position the next and criteria will into we've last maintain year, couple had continue over to too. at continue this But to some investments think

Operator

over And questions. will I turn remarks. it call for the management further no to there now back closing seems are

Tim Mattke

interest MGIC. to talking and in to thank It was future. another in forward and exceptional you of for each with Thanks, everyone the quarter Roel, look I their want

Operator

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

You may now disconnect.

MGIC Investment (MTG) 6 Aug 222022 Q2 Earnings call transcript