Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation Third Quarter 2022 Earnings Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I will now turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.

Dianna Higgins

Thank you, Kurt. everyone. welcome and morning Good Thank you Investment in your interest MGIC Corporation. for

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

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

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

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

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

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

over to pleasure With that, call have the I to now Tim. turn the

Tim Mattke

in quarter we first to half the delivered everyone. Good Dianna. another solid year. the of results financial strong continue I morning, Thanks, we report and the pleased that am had

families to easier executing quarter, and achieve critical housing the sustainable homeownership. strategies, making our by it focused including the and business for During market providing remain on we individuals to support affordable

summary, We repurchasing again in-force, results on the by an our of more and in strength stock paying the once stock we XX.X% insurance will on But grow annualized equity. position common return call. ratio, a into demonstrated decreasing financial dividend, our to capital leverage get producing details continuing throughout this our

in-force we increase million In quarter $XXX second X.X% the GAAP than reflects $XXX rate. in-force stood quarter. ago quarter, third more an of income. the from in earned the of net end end increase Insurance the of the the year insurance a The during from at X.X% increased a persistency and billion, a at quarter growth

Taking a look at our the in-force portfolio. performance of

losses reserves prior XX.X% ultimate of Our us in delinquencies loss of quarter. on offset reflects new ratio by the was than quarters. number a a the This re-estimation delinquencies loss reported established the more negative to in quarter, in the on

expense. leverage our we existing holding our to We only strong the quarter, In positive In the experiencing new of our position are support book and insurance addition, company reducing credit the change not and encouraged our material the liquidity and ratio in-force. credit used books XX% have in future the a of We our on date, in approximately in-force not portfolio. to by we years, quality our remain our overall. from XXXX remained insurance seen notes we credit grow and those To deployed business redeem strong. due portfolio XXXX, performance capital senior trends XXXX interest of

million. shares dividend for also paid repurchased $XX and a million quarterly We X.X common stock

Retiring dividend this operating X.X million enhances $XX week, target delevering past a holding overall. authorized with company near the in our of has company. to use of ratio in both holding per our dividend and a challenged year, flexibility significant been million. the near the million term. for company environment repurchased Additionally, stock debt-to-capital we payable the financial the debt and XX, of $XXX dividend cash common Earlier our and October, a expectations the and on The share the additional $X.XX company holding Board November in company an economic liquidity a shares position the paid of

We retain to at the holding higher of liquidity expect levels company.

current me the management of light In to take environment, our minutes a few discuss strategy. capital let further

of navigate is decision prudent be strive our our making. consider First, important holding to for and capital deployment allocation company, This return the as dynamic, retain to capital environments. shareholders capital including strategy we routinely level is versus and We capital thoughtful both on we management we other changing company capital operating level future providers. that the and economic particularly and the of of

capital for to types both and the the value maximize approach the capital long-term and flexible several the operating transactions designed the share including approach balanced transactions use company. excess both of position of of market forward traditional maintaining a through commitment holding loss of This strong in involves ILN company reinsurance on transaction. is quota and our reinsurance, Our market

the reinsurance And We policies XXXX place written during began most the reinsurance into share quarter’s in call, of our in last through we share as NIW transactions to to quota our XXXX we cover in cover quota the entering mentioned into had in covering books ILN completed at transaction year. XXXX the of in market, excess-to-loss XXXX start in April, which traditional XX% entered most have XXXX will addition and first of agreements of the business.

losses of capital, environment of have our economic transactions to enhance these our volatility diversifying addition In the reduce to potential the and in weaker sources returns.

and our would to thoughts on provide few I additional a to over share Before like the more turning environment. current activities, on it results to management details our capital financial Nate

the past of rapid originations continued has volume interest over to increase to First, due decline mortgage the months. the in rates few

for for I than smaller volumes years. last quarter, new As record overall opportunity private X insurance last mortgage market mentioned the the the is

behind the volume record to be high We set insurance will but expect years. X new remain last written standards, this during historical the volume by year’s

extending insurance XX. June increase, stream. to increased persistency While end approximately revenue Persistency new of up from on approximately the continues quarter, at sports is XX% the to at existing XX% the our insurance written slowing,

continues our to result, pace. grow, a portfolio insurance at a As slower albeit in-force

As many persistency, future in-force, you the of revenue. two insurance of with aware, along drivers long-term are are

affordability on challenges the annual growth of significant softening some home increase prices. put interest the declining in remains and downward rate but others. in and price rates in historically The have rates, pressure growth home Lastly, at high is areas

of credit values potential on quality While incidence over created on related years the increase and should help reduce home price have decreases the in homeowners significant the the couple of many of in-force. to and risk our equity our of XXXX growth the due XXXX the losses, home claims strong the book to mortgages for years last much

Our reinsurance mitigate agreements our losses. also help

normalization demographic prices meaningful is MI gradual overall market the forward trends of economy, We long-term continue believe to look and healthy and opportunities. we are suggest housing we that the home for encouraged a as

me let Nathan. it over that, With turn to

Nathan Colson

morning. Tim and Thanks, good

increase in in As XXXX. per reconciliation compared A operating diluted due strong redeeming on due be the GAAP quarter same notes senior and our third primary net release, difference in quarter extinguishment adjusted loss of to operating the due but income to income of in repurchase of the earnings net the convertible detailed XXXX. our debt share income $XXX from diluted XX% Tim quarter. net net adjusted diluted share, net to million we or or last $X.XX per the million per mentioned, income $X.XX in had we an On another earned income $X.XX the during basis, share year. the was $XXX in an diluted $X.XX found period We earned share of can XXXX from continued debentures per

in was XX September also Book the December due income, on of of share our as are book unrealized per XX XX, in year. $XX.XX per shareholders’ reflected decrease offset value decreased to to rates, result investment losses of interest unrealized to compared increase increases portfolio $XX.XX net are The from The income. December from but equity $XX.XX and therefore, value an by modestly net market reflected modest last not share. primarily in in as losses reflected

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

the rates the value unrealized several over $X.XX by by a at and share interest resulted ago. December year per reduced in in book while XX, at last that per gains of quarter, book increase rapid $X.XX months $X.XX end unrealized the value share increased by However, losses the

rates in quarter. quarter, Net a premiums decrease in XX.X down increase point the year. period premium million $XXX last were during on were premiums earned year. revenues The in-force. net insurance quarter, somewhat yield ceded our in-force points The our primarily the in total to premium in portfolio to insurance During compared by million in basis X.X an the the yield, last premium due a the same $XXX quarter in and was The in the offset in-force reflects yield premium for $XXX $XXX million of basis in-force. million earned growth was effect decrease our to compared

we the rates decline As discussed, off. older XXXX higher in-force to previously we premium yield premium expected as continue the with policies throughout run to

the same losses in and Turning compared the $XX to million to quarter credit, last negative for $XX third quarter were $XXX negative net incurred year. million period million last

the year. quarter reserve in favorable from and million of primarily favorable reserve favorable $XXX re-estimation The development favorable delinquencies million $XXX in $XX prior the loss quarter review of the last losses development of was delinquencies of loss prior. development Our of to in related quarter on million compared quarter last to and and XXXX resulted ultimate loss development in reserve third

expectations, exceed delinquencies on ultimate continue to curates our our adjusted As we’ve those expectations. loss

pandemic cures XX,XXX our second in outpace loans straight marking XXXX. quarter, The and the delinquency to of the quarter. remains continued XX,XXX inventory by in from Xth delinquency lows, the loans of X.X% of number inventory decreased to peak the notices loans, the new historical at our quarter decrease during quarter of In

level seasoning into paid historically, large The vintages moratoriums exposure the pandemic. claims due to flat and levels XXXX years. similar of notices number see for claims foreclosure delinquency an quarter loss of expect order to paid, and prior at generally to forbearance the forward, received but new XXXX claims the again may of emergence to in remains increase and peak those Going as plans end, increase the we the the experienced

end Approximately our even to books relief XXXX the XX% later in-force the of covered was and to primary of the in-force some at addition the Drilling transactions under reinsurance related represent primary the total down of primary by transactions at further, later extent provide quarter. PMIERs some our in-force. quarter. reinsurance and books risk was These XXXX by of The XX% loss end risk protection. to XX% of in covered extent risk to the transactions capital

on for find that XX-Q information more our reinsurance the you in our third quarter. For transactions, can

capital our to management Turning activities.

maintaining writing for growth financial capital include Our deploying and the company the strength to holding the priorities flexibility of company.

the At maintaining For the means PMIERs company, target level level this a it we changing operating robust maintaining enable liquidity needs. means in company, that of environments. in excess excess expect near-term operating of will holding growth of a

the and During the quarter, at above levels the MGIC targets. liquidity capital were our holding company at levels

and share a $X.XX shareholders a $XX to of of common strategy, million total As million, consistent for we outstanding and a paid a for $XX shares result our with X.X we capital cost repurchased total of stock our million. per dividend

redeemed by expense million approximately approximately with ratio debt million, $X.X from outstanding our $XX repurchased million addition principal return, shares In we target to our and dilutive by debt-to-capital $XX.X line and of due is shareholder which senior XX%, our annualized reduced to our in notes XXXX. our reduced debentures reduced These interest capital to amount in due XX% capital actions level. and in aggregate convertible in XXXX

of As quarter above the economic toward minimum the strategy and assets current and with level target. we At remain MGIC’s was requirements, thoughtful capital cycle, billion the our in company. navigate an of we excess of continue prudent end, PMIERs mentioned decisions the earlier, eye to allocation and MGIC success $X.X had capital Tim through long-term as our in available

the and company the to a of with company’s operating dividend financial company, holding position strong the the at liquidity company, our holding capital and a from position overall. we our enhancing received flexibility the result OCI MGIC capital strategy, paid consistent As and approval of million $XXX

of holding approval. also the dividends OCI from company Future MGIC require will

of near-term, mentioned, levels the the past the holding to liquidity expect in company. company months. Part in future the we than holding higher As company more the operating liquidity is dividends the levels for of reason at large XX uncertain is at Tim outlook from of higher for the retain maintaining

capital we of in if dividends, future challenged will the amount company could levels, retaining to time or evaluate We experience but that be a mortgage holding between for the the will our may future dividends using dividends impact credit, framework, target economic preferred. more a capital operating reduce extend consistent environment the which company

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

Tim Mattke

mortgage few will eliminating for it upfront for our business products. FHFA Overall, income we additional this we that before the certain it affordable fees are moderate A pricing first-time up are changes comments announced In changes questions. these for think open point, the homebuyers Nathan. October, Thanks impact be At have borrowers. on what low uncertain we overall. directionally and positive will and

supportive are low and down for income access to the lending to homebuyers. we first-time facilitate However, low-to-moderate of efforts payment

our us quality the combined believe in capital best been continued We look another continuing and our FHFA and sustainably We success responsibly all service, to achieve of delivering. forward we closing, put financial In and with solid our successful we with to results the work flexibility, expand to the quarter to that to customer financial access position strength had stakeholders. and GSEs and offerings superior for have homeownership.

We objectives the long-term the company. place on of have in to team our for right remain focused the success business executing

economic We help the navigated down changing to have history, many overcome continue we to the the adapt borrowers obstacle that our cycles our different payment. largest so to successfully and will needs we customers may homeownership, XX-year throughout of

that, operator, With take questions. let’s

Operator

Barclays this now At have Instructions] Mark on we the line. DeVries from [Operator time,

Your go line open. ahead. is Please

Mark DeVries

you don’t of you about are also given uncertainties of kind also about the like pricing, the made could Okay. how observations thinking talk of pressure any are some of home And here? pricing just we Thank are kind directionally doing? you. here what have competitors you you Tim, on I talk seeing some know to macro about just and prices but

Tim Mattke

responsive don’t Mark, we Yes. answer to you. will talk hopefully like acknowledgment for the And I questions in the I about that way that appreciate think pricing. your I is

deploying potential returns losses. were and more and more an required for about there of is think environment capital in I get to where the off uncertainty expectation that

sure to make that you that. to do accordingly price need You can

that. remain we are operating think is focused I influences continue that return we expectations, and obviously on to the environment

So, feel really wrote good this about the business quarter. we

As continue we competitors. comment we on forward, but not to environment I adapt we is, look rather will from seeing what to would what the are

Mark DeVries

Okay. taking comments here then we the company. view consistent the slightly and of and the that pace capital seem circling Should more And slow, you capital to the we to around Fair this to capital capital? or saw holding expect liquidity enough. conservative with liquidity you made returns of were back those quarter of returns kind be around

Tim Mattke

we we into will there. there that is I level is think debt and anticipate into prudent a just that to right expectations going but One, still execute sure holding couple what a up that share you and a we time, will share repurchase at all to that make think the good lot maintain aren’t guess do level large share to been dividend think on things at want, – don’t we are to have company. we that of using We of want repurchase, versus in I of level. the another the all the and We liquidity of repurchase. repurchase increase of put a company got the that to same roll holding

Mark DeVries

Okay. much. Thank Great. helpful. very That’s you

Tim Mattke

Sure.

Operator

you your Mark. Thank for question,

will our We person and in, George now person that with Bose is next bring next KBW.

is line open. Your now ahead. Go

Bose George

given is This your actions in kind is guys. to stable? going your think out buyback. and forward, capital about Are of coming of we now? And we to reduce think follow-up on when remain stand buybacks of where debt I wanted done just Hey leverage terms earnings it should then just you really the about Bose. things

Nathan Colson

Nathan. Bose, this is

in would we we quarterly repurchase. to on kind at we forward, point are there still outstanding. this debt-to-capital is million the $XX of then consistently of place, And with I think shareholders further executed of return, we approximately had to junior question opportunity relative of target, the our the If got as dividend consider exception to at that intention part have those, share the relative go the and Tim about to no to retire convertible de-lever are mentioned, the certainly we capital so the that, that. first have obviously debentures

be pro holding million company, year-end, at about in were with over we got the and think we thoughtful the repurchase. of to dividend pacing got, the year. holding on company. several forma basis, from That $XXX environment, this But I $XXX the a we at where about a have share flexibility will next the have us million quarters of gives we lot

Bose George

thoughts this whatever us on while, give what about do updated you that Thanks. of can Great. persistency, then at for And remain that touching where think any a could rates X%-plus to Assume just actually persistency? could Okay. that rate go? kind you

Tim Mattke

this is Yes. Bose, Tim.

seen I think go higher now where we to up. it think in you can above you have ground you persistency in seen your sort things. an I as types XX%. persistency of cancel ever have have I environment Act different again, Historically, easier those don’t you expect and tracking XX% as Homeowner force we persistency, about impacting that historically, always that sort things probably refinance well then potentially of that think view all within the have I of Protection mix maybe to see to also and than from

direction, that think So, the most recently to XX% quarterly year, run the we as going I rate end I XX%. was think of obviously, move in

in much higher that So, the anticipate seems than imply is really to low but to that. don’t something that mid-XXs, anything

Bose George

Okay. Great. Thanks.

Operator

your participant And Harter for much Douglas is next Suisse. Credit so our you Thank question. from

now open. Go is ahead. line Your

Douglas Harter

seeing any have an maybe around of in cancellation with change consumer the to behavior the early policies? Sticking are to question, look persistency you appraisals getting

Tim Mattke

down what of actually say a I view happen, say. I causes small would material. persistency as that it’s to cancellations Tim. Doug, I nothing go to amount or should very would normally That’s

at this that haven’t of any wouldn’t portion would of meaningful keep higher meaningful behavior we I longer expect but our in interest levels, to stay I become it’s rates But change we eye say the point. any something that noticed at consumer an on, so And a that cancellations.

Douglas Harter

Great. Thank you.

Operator

is [Operator Instructions] next Mihir our from Bhatia question of of And America. Bank

is Your Go line ahead. open.

Mihir Bhatia

back your where the based that for have start or the I hearing these comment for had Thanks about maybe the regulators are from quarter…? just is going wanted them to question. company. the on you macro, reduced that taking the just you from to Hi. Is holding with as current with something about potential discussions dividends

Nathan Colson

on it’s take think to will we reflection relative what I No, our just the point, business of more this needs capital future our in Nathan. it’s is to approach Mihir, levels. uncertain At more that position the of a Yes. the the outlook. evaluate we the think target in are

may have in capital think we we point as have that like out out. from that. was much, an to the on also our looks been will be But capital will and the a make our It our that’s I the could that be target challenged, the in more view, we dividend at levels above position forward. in when operating from But there levels just at successful more our going a capital future. out just that company. getting target dividends not future that’s there result change decision had appropriate what that based calling very of And of as environment outlook

Mihir Bhatia

the the be level are And sounds Right. for us current just what you about? your capital? we Is remind should it target like – right thinking like is levels it current the then level can just

Nathan Colson

really reasons to an in about is excess PMIERs, a to We might of but access have an wide hold that range framework we want PMIERs. to the we talked stated thinking why think about about

that’s and quarter the the and, details the with the the billion targets, is, the $XXX into gotten of but discussion million what level exactly of ultimately, OCI that above haven’t approval we really what internally the the at payment was our dividend. and prompted and $X.X of end So,

Mihir Bhatia

can that we little years, on And talk bit, update Okay. should a year to about just next too? question then think X last expenses, expense your just my any if And outlook? or about you how

Nathan Colson

full full in about range. January, million $XXX to So, year a million talked year, $XXX we

our at up The high year biggest due factors, maybe much far likely end owing so are of to high expected million a XX-Q, plan settlement have also then in charge range. accounting above end the the higher. higher to there we think than generated end additional And I have, being the that $X third we pension expense. drivers some but about the are a within this related couple or compensation of would we information, performance-based that quarter, of did just are to is to so ROE

to points something our to Relative this finer XXXX. on expect able impacting XXXX, call, we it. than less guidance, are point, be in some to where earnings kind at QX things will provide better that, But in those slightly we of are thinking put line do I So, I XXXX. think are on we

Mihir Bhatia

much. so you Thank

Operator

Geoffrey Thank Dowling. Dunn of you. And comes our next question from

Your open. Go line is ahead.

Geoffrey Dunn

above think Good saw have look time Thanks. mid-XXXXs to with morning. back I the for the MIs Nathan, last we X%. yields we to investment

new again Given sustained, is portfolio, next that today, be seeing money where are and we years? of the if your turnover X within could conditions the

Nathan Colson

a I bit actually even quite rates think are X%. right than reinvestment higher now,

to or If we cash Do have basis, we assume – pay the flows I the don’t positive X% those will to environment we want would do opportunity of X the rate the haven’t that down generate that environment approaching to spread all-in other the done X of But for for continue on do have like some invest reinvestment operating see with the you cash. a an uses the want kind as mentioned. seen it But you quarterly or of we what like in book with cash. strong to and we to debt next retain this, that really opportunity start to rates yields think years. change years, you do

Geoffrey Dunn

X dibs? of just point you a have the in formally or target at coverage holdco still put is And changed on it a to Okay. year the cash, plus the multiple trying all, ratio then terms of years your interest,

Nathan Colson

The that the I above have flexibility. forward. think our does liquidity that share the the million year, targets talked We we going of levels the actions repurchases, targets. expect just gotten But certainly, at really more haven’t Yes. we liquidity continued think give because of last we taken, paid in about don’t are pay holding our quarterly company. details as we dividend we But $XXX how the to additional the all dividends that’s us with about into

them hoc. We ad to be expect more

So, we holding to next think not at as need period money a of about the company the but time. quarter, for just the longer for something being

Geoffrey Dunn

Thanks. Okay.

Nathan Colson

Thanks Geoff.

Operator

Thank back you very are so now I to it will over questions, further turn much. There no management remarks. for closing

Tim Mattke

everyone’s phenomenal Appreciate MGIC, talking interest look Kurt. you of forward near Thanks in the all another to quarter, to and in future.

Operator

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

will now We disconnect.

MGIC Investment (MTG) 3 Nov 222022 Q3 Earnings call transcript