MTG - Earnings call 3 2023 | MGIC Investment Corporation

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation Third Quarter 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.

Dianna Higgins

Thank you, Michelle. Good morning, and welcome, everyone, to our third quarter earnings call. us Corporation. and joining in your for Investment MGIC you this for morning interest Thank

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

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

we our on you post our other our underwriting in posted force In presentations to find quarterly presentations addition, risk pertaining information about or information other time on may may supplement information that we and contains past and primary website. guidelines valuable. a to our corrections to From website time,

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

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

Timothy Mattke

I'm report everyone. great another quarter. to we Thanks, pleased morning, that had good Dianna, and

risk to talent the dedication of trends, a market from team. to management credit our and prudent continue We the and benefit strategies, favorable disciplined approach

long-term creating by value strategies, exceptional to our business committed maintaining and focused and executing flexibility. stakeholders for are We our and strength financial

billion financial net the our on to new annualized our driver force, quarter $XXX attention $XXX significantly $XX.X earned MI higher XX.X% origination results. expected, insurance our by million this quarter, effect revenue are lower mortgage driven we wrote and challenged activity. stayed due as lock-in the at third with rates, main affordability written We sale in has reduced which -- to refinance the led and of in In billion equity. mortgage for year and Turning homes of borrowers and strong, ended the rates markets insurance for and to mortgage generated return fewer an smaller income the

each those of remained tailwinds the headwinds on remains to our book the the performance somewhat XX.X% ended the increased quarters that force. persistency The offset and interest Annual rates of in persistency our are For a has of at XX year higher last of volumes have lower third the by from quarter insurance up net and our result business, the insurance XX.X%, our historic tailwind flat with what start expected at year, for results at delinquency force financial our be lows. inventory new we consistent that year. relatively has in-force in increased of is and a during our continues the insurance persistency ago. Credit on

affordability rates. interest be have the writing despite prices strong challenges new higher and credit to continues to we expected more resilient are than addition, In characteristics. Home insurance continue

home sale remain there meaningful optimistic of is slowed the trends modest that demand market declines. opportunities. long-term homes still tight, available noise market however, price However, prices has have housing while rate areas, remain growth suggest home resilient. MI some relatively and others remains supply in the pent-up the is for The demographic stable, will generally I while there of seen is in

environment expected few the of improve risk market's return to to had pricing were risks their third our gradually rates during pricing began meaningfully and the home to the address of even I position fall our uncertainties year. we I've during from we views views our was and expected last than quarter then prices peak. year we in pricing also also was stretched the gradually second spiked, of During interest market of still discussed year discussed and in actions fourth the took in last where to quarters the higher have calls, improve this last year, during market the our and though affordability

NIW two. the pricing immediate timing a the NIW resulting reminder, between action a as by taking leads not As is or and month

see return from you our risk third this of NIW primarily of is what in of late quarter views our reflection So quarter year. second a

As I in the quarter there's reflected NIW. believe on last that market we and mentioned additional call, position improvement in our is third our believe

our and debentures the October, to During retired the could also X% junior a we fully redeem settle and dilutive eliminated cash debentures, we where quarter, active and with our through quarter capital share In reached which September elected price so. We were the shares. very million convertible they all we third on potentially in X.X management level actions. do our were XX,

quarter quarterly and dividend million. both our program the for repurchases. In capital paid million reinsurance $XX our the stock of removed on election that full X.X share crisis shareholder financial there through for the and While at per vestiges we $XX Nathan repurchased the million million retirement additional the remained very but will the a stock continue debentures time shares $X.XXX common sheet. to of common only was balance return quarter, of during last we're active left share also provide of financing details, program the and our $XX era the dividends with redeem,

in repurchase that credit the stock a financial of and is and holding activities. reflective company share flexibility are the activity retired, our and With value the results $X.XXX our very generate paid recent are through dividend price quarters, fully the capital. In to required Consistent our to liquidity With and current million long-term that be have The the capital and it MGIC quarter, XX. shares strong credit Board completed the believe company. target stock with attractive origination our being a Nathan. we levels share share million over see strong levels, as addition, you which continued common results X.X additional insurance market, capital October begin to growth remaining reflects repurchased dividend mortgage and be will and company, XX, October paid quarters, valuation of last total let activity. With debt-to-capital target. in plan million financial to we recent performance the me $XX for authorized an valuation turn per financial capital sold enhances continue the we payout on of that related for MGIC the range in the our our experiencing, level this with can and from of from November delevering our common return position position that, MGIC increase holding shareholders. Earlier At debenture and of strong our we dividend a to to expect above holding week, we $XXX the a levels smaller ratio to repurchase combined performance

Nathaniel Colson

morning. and Tim, good Thanks,

reserve exceptional second net third continued compared were credit performance compared losses quarter. to of can another for been $X.XX the solid be last GAAP $X.XX of share reflective and mentioned, of development quarter. to have close detailed year. results results found per this Adjusted income the A net operating favorable income again ratio last we in per earned operating diluted a the negative and net Tim loss diluted in loss financial our income $X.XX to $X.XX diluted quarter year. reconciliation compared earnings with experiencing, net had resulted income which was As release. X% to share of to quarter adjusted The we in X led per

the million on of losses XX,XXX reserve and ultimate coming half favorable delinquency from XX,XXX year. the which received half quarter in and quarter, notices delinquency development XXXX. In last delinquencies notices loss of quarter. prior X% quarter, the from in of prior this $XX delinquencies XXXX increased reestimation by coming again and quarter delinquency about the new half In review compared was in our XX,XXX to favorable we XX,XXX the continues resulted XXXX low. third in quarter, The broad-based inventory to and and development with in loans, historically last be first to received Our

While third the were below were higher XX% quarter of they in new notices levels year-over-year, the seen XXXX. pre-pandemic

the emergence years We that new historically books for the continue to increase what XXXX notices of in large a seasonality XXXX and being may vintage. are loss to higher expect in due delinquency level

increase was XX% increase to our in-force compared to net $XXX million During the and total end continued the up The decrease The Net million shareholder flat per our by consistent quarter. quarter strong net expected due in were primarily $XX.XX share of year. accretive yield $XXX to revenues The quarter, in repurchases, million due was to quarter remain per results what to start the third relatively last compared in year. Book in $XXX of from share quarterly premium the last to compared somewhat the the premium. quarter $XXX XXXX, million at basis or with ago. year. book were flat dividend. has earned the we premiums earned offset XX.X quarter, -- in-force yield value The was a premium share at premiums ceded last in value points in was the year in an third

quarter a higher a year. to and for XX the come was from up interest to million the in that yield quarter value $XX our up this potential quarter be and rates basis rates up points higher The on book continue basis XX through third the earnings points a Net for in last the headwind third long-term ago. investment While quarter million in are ended portfolio interest results. continues from investment X.X%, $XX income book of portfolio, the the positive per share, year investment at

expect to continue rates yield assuming environment, be to continue a reinvestment book skill. the rate interest And increase. current the to we Our above similar book

we from the year. the increase rate quarter reinvestment million, expenses difference from between slow million yield rates. Operating our $XX Although the million last has down quarter increase as third and $XX last the book in yield year the to expect and narrowed last current the of down in the were book quarter in $XX in

will range of expenses the operating year full to $XXX the have lower million. of year end $XXX we the million toward be provided expect throughout We

our capital Turning activities. to management

I were mentioned, and during program additional we quite some Tim our the active across reinsurance quarter, wanted to provide As details.

protection seventh our agreements and Our adverse provide either sources ILN of reinsurance written provides loss reinsurance which markets. all with from of a volatility we of environments XXXX of diversification or the XX% of we and our June agreements ILN to on agreements $XXX share excess in most in traditional the policies and our through transaction, highly of our use the agreement million a XXXX, of panel of These macroeconomic loss policies covers and quota share terms forward to October, will and commitment of completed written program quota capital. In agreed reduce executed that cover includes XXXX. of reinsurers in rated losses nearly flexibility August

December We share the in quota our to treaties of offer participated XX and tender elected a cancel also deals. effective certain tranches seasoned ILN covering XXXX for NIW

approximately NIW. XX% third it turn transactions of at these We to extent book reinsurance XXXX books year-end risk At of our strategy XXXX some relating that, through the all are coverage actions let end XXXX to by net me on of covered quarter, most XX% these the reinsurance over our of with to program. And back excess future was to our our will expect of the with level and the positive in-force Tim. the be PMIERs consistent to concentrate our recent effect modestly or and

Timothy Mattke

its few data comments appraisal for A questions. public file. set open announced October, new FHFA use it we Nathan. before Thanks, up In uniform additional

MGIC. supportive transparency and with are industry GSEs responsibly we had very extend Thompson's other and Director my of to continued up, improving system. housing look continued work for the solid to FHFA sustainably I finance successful want to the We to shareholders in to customers, quarter and home stakeholders key commitment partners to in continuing results. FHFA, financial We our to their data expand and the the another and to access confidence forward wrap appreciation ownership. To trust deliver and

we encouraged the remain and that, we positive dynamic insurance experiencing of trends offerings as in and well forward, our We our all us economic resiliency are and questions. business success housing to on remain operator, in our of model let's flexibility, financial believe take business look best the navigate stakeholders. the as experience and we that our a ability the and portfolio market confident by strategies. in our put quality position And to As execute deliver and capital we with credit superior combined our for to achieve landscape strength customer with continue transformed

Operator

[Operator Bose KBW. with Instructions] The from question comes George first

Bose George

just I capital wanted return. the to first about ask

You as cadence the the noted of think kind we well of the Or that we that, flow? being think stable of happens? kind could as cash it free should and about that increase. as sort And of should staying the leverage of increase leverage increase

Timothy Mattke

thanks for the question. Bose,

I think way the there And that not resources more raw good a company on the we delever. it holding delevering about just material balance we of is think our now spent to sheet. amount there's

XXs increased the level more as And example. return October I So we flexibility to, we some we alluded an as as think that us retired saw in allows capital. the potentially

as it additional forward. gives So capacity move us we just

Bose George

Okay.

Is So stays leverage roughly probably stable. that?

Timothy Mattke

Yes.

Bose George

the then I that a equates some longer items. this guidance In of kind your guess, Okay. of Or year, this ratio, to level? on roughly Perfect. there onetime term, was And I kind expense guess year, XX%. reasonable just is

could a So little that see come we down bit?

Nathaniel Colson

quarter did certainly us there's little ratio the We some we do items, in decrease the to full year for first that Nathan. year expenses that led expect unique this have a But expense to of is this being Bose higher. the going forward. capacity bit especially

year. end we're typically to we QX range And year -- good I think, the lower this the provided feel for think the we've the toward part, we the call. for -- an the guided the I in now, QX for that update earnings that in in lower of

provide January we'll for think I XXXX or expect So guidance. I Again, in February. early

Operator

with of [Operator Instructions] The next question Richam Nate comes Bank America. from

Nathaniel Richam-Odoi

pretty competitive stayed that? has you the and environment you yield around flat the as pricing with talk premium can the guided. The about very guidance currently dynamics But

Timothy Mattke

I ago. at that premium we're really our year saw the that we're it just is positive premium the winning see a beginning is And dimension. sort a mentioned higher share net as view we additional remain meaningfully would the think year I relatively in sort the you of was within think of it Again, script, we But Yes. can stable, than of probably little yield has. over what us,

And it's so while what's the marketplace, going to future. and it's to say competitive hard a happen in

we that the We're get quality amount took really right past good the pricing about happy good and risk that get comfortable the can the we're actions I think off get that of to volume a level. able of that really to that a ultimate in still we to return returns credit we feel business.

Nathaniel Richam-Odoi

And credit, curious of little I'm up like of but pocket a are you're still pre-pandemic if And concern noted on levels. that noticed like from down quarter-over-quarter, you general these you there's kind then just close keeping any but on? -- eye on that eye mean out just credit, strong I close the still back the curious a a there you giving you're housing anything for see in macro. of at if obviously bit

Nathaniel Colson

delinquency a unusual Nathan. that there's say seeing. we're look of really as kind lot items receiving, it's would new we're Nate, at the unique we not that notices or I of Hi,

vintage, I at you're like other think FICO it characteristics or is whether looking even whether LTV. looking you're relatively broad-based, geography, at

saw, particularly coming So returning I and think levels in levels to that, pocket out kind for normalized that that very 'XX more concern don't very, of low here. of calls we just off us, of 'XX a

Operator

Scott Instructions] The Heleniak question RBC next with from Markets. [Operator comes Capital

Scott Heleniak

I seasonally. if of the for of Just know that the color expected give you about little defaults could sequential kind you on mentioned increase you in wondering was -- more a talk kind QX.

on significant, kind is just you low more that off uptick modest Anything You little and of more on levels? a really kind But just can of nothing that? a just that. add mentioned bit

Nathaniel Colson

Yes, it's Nathan. Scott,

we I think that to is it. how quarter third the think back many about Historically, the pre-COVID. years

seasonally, was rather, quarter a notices. The a third year, for harder quarter harder new

of little seasonal The just credit a from year, first half the better a standpoint.

and the years. for unique to less dynamics in XXXX, just comparisons the at I when So we given it, XXXX think are look I us think those meaningful

seeing XXXX think XXXX now, XXXX when account a strong compared to that though for have compared us. lower at I credit environment to are XX% much like basis, very and book still look you a still XXXX, even we on larger to even feels us, delinquencies

Scott Heleniak

more And to a too and know? is just anything able can positive, impact there on there helpful. little you're That's share think if quantify -- that? the there you to the from tender wonder I then the the is Is Okay. quota ILN was early add said a to further? canceling it anything more from you but Or bit I

Nathaniel Colson

go $X some $X then tender on did Sure ceded we numbers in we things, just side premium in. share try put approximately October. premium the we earnings And we cancellation no, paid expect will side, million of and release, that million, a to of that pay a did we through quota the fee the the quarter. in tender on fourth will approximately in of But

ceded will see also those QX, will premium the then benefit beyond. premium the rate and through that XXXX in run run So

Operator

[Operator Instructions] Next with Hagen BTIG. from question comes Eric

Eric Hagen

your What's to even the or on in in your reinsurance and those the how against of pricing drive even next and backdrop high conditions the kind your drives return market rates how appetite conditions market interest and capital willingness just ability your and it of perspective year? competitiveness

Timothy Mattke

Nathan and It's Tim. little probably bit. I add could can start a

of the think the I capital into I and guess reinsurance as that as markets. slipping traditional feel markets markets I we the sort well reinsurance

open be if we able year, think conditions, And of we capital and at like they're of execute we to plan from planning to the a we'd I had to attractive ILN they're skeptical that. beginning again, don't standpoint, markets. this execute. But we're said in at sort able the when on available be

that there. aspect. From stability reinsurance favorable traditional markets, more So I much at we think the feel very

to had that fair reinsurance would had it's with think year as partners interest similar I a a rates of think lot increasing and home with what say prices our I concerns happen we ago, questions.

I think for is little bit a strong, than comfortable. able a at they execute. point, even be year it ago probably stronger like It us capacity as this feel more seems to was to

it think we loop the sort our of sort we're It's but think I to in ultimately our ultimately, to capital a there is, and we markets since execute in the regard think but we sure able quotas standpoint? back in play market want environment. making such consistently that pricing in just the stress from reality feels think that market distribute ability we and I very here good. How feedback appropriate capacity XXXX. to losses There's those does we I into is to of fund the price about in have a think that started how the primary about on that reinsurance think that primary for returns us a way another getting helpful being

too like day trying a impact not market So line capital, to to getting when X we sure reinsurance much to in feel on happening as play upon we're you'd deploy Nate, on far good else pricing that the what's return we direct anything add? versus want over make the want as that.

Nathaniel Colson

it XXXX, you terms our see some and capacity risk little the even on insured in do traditional that in to But reinsurers. in year volumes We've on 'XX quota bit, most of larger and I that of it than already And maybe our a many that XX% feel that because in reinsurers kind expect a has books placement. now small now 'XX XXXX. of think persistency bit, I part you of But underwriting of as a and mortgage what year market, of challenges origination level share a got capacity from a a wasn't at XXXX little a see the XXXX new we've and normalized share was because -- share cover XXXX, rebounded I does fast. for a was standpoint just quota XX% quota risks the are bit think that can little more origination for bit. just think less smaller off running to challenging a just of also some off capacity already first quite so running agreed now increased lot their a 'XX market, some as reinsurance coming there's

Eric Hagen

the detail. great I and mean looking Okay. GAAP also book That's AOCI. Xx both the we're at we're presenting value

is the think we portfolio can a to present. GAAP yield you, you yield securities like So about the Thank for guys. there market guys that relative

Nathaniel Colson

investment I'm asking sorry, portfolio Eric. you're about. The the market what on yield is

Eric Hagen

talking the Since and about value there? without book Yes, exactly. AOCI we're the in with

Nathaniel Colson

it's don't XXX the in book me, basis points yield. I front that immediately it. of have about better but than Got

think So and I we can mid-Xs the the exact looking but follow up yields mid-Xs. and you're you get book number,

Operator

over questions management I to call turn further are There closing remarks. now no at would to this time. for like back the

Timothy Mattke

just their our Thanks, wanted our forward great another for Thanks, part thanks of XXXX and and coworkers thank then all to MGIC Michelle. for to customers everyone. of of everyone in to last and look interest I the all and quarter XXXX.

Operator

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

disconnect. now may You

MGIC Investment (MTG) 1 Nov 232023 Q3 Earnings call transcript