MGIC INVESTMENT CORP Q1 FY2025 earnings call

• Tim highlighted strong first quarter financial results with net income of $186 million and 14.3% ROE, building on past momentum. • Capital management included repurchasing 9.2 million shares for $224 million in Q1, with an additional 2.8 million shares repurchased in Q2 through April 25. The Board approved a new $750 million share repurchase program and a $0.13 per share dividend. • Nathan discussed favorable loss reserve development of $50 million from prior delinquencies, a delinquency rate of 2.3%, and investment income details. • The company bolstered its reinsurance program with a $251 million tail risk reinsurance coverage in Q1. • Tim mentioned meeting with FHFA Director Bill Pulte and supporting the Middle Class Mortgage Insurance Premium Act to aid homeownership affordability.

In the first quarter, MGIC reported net income of $186 million and an annualized return on equity of 14.3%. The company wrote $10 billion of new insurance, and insurance in force ended the quarter at $294 billion with an annual persistency of 85%. Nathan noted that net income was $0.75 per diluted share compared to $0.64 last year, and adjusted net operating income was $0.75 per diluted share versus $0.65 previously. There was $50 million of favorable loss reserve development due to better-than-expected cure rates on delinquencies, and the delinquency rate stood at 2.3%. Investment income was $61 million, and the book yield on the portfolio was 3.8% at quarter end.

• MGIC expects share repurchases to remain the primary method of returning capital to shareholders while continuing to pay quarterly dividends. • Anticipates a modest increase in new delinquency notices due to aging book years. • The overall book yield on the investment portfolio is expected to remain relatively flat for the year. • Operating expenses for the full year are projected to be in the range of $195 million to $205 million.

• Uncertainties in current economic and geopolitical conditions pose risks. • Tariffs and broader economic environment may impact pricing and underwriting decisions. • Deterioration in the economic environment could lead to less favorable loss reserve development.

Q: Hey, thank you. Good morning. I was curious, just given all the uncertainty around the macro and the headlines we’re seeing around tariffs, have you done anything on the pricing or underwriting side to adjust for that? And then maybe just more broadly, how are you thinking about credit loss expectations going forward?

A: Yes. It’s a very timely question. I’d say it’s tough to know exactly what’s specifically going to happen on tariffs and sustain. But I think when we think about our business and our pricing, we think about a wide range of different sort of scenarios and environments that we can perform under. And so we have to take that into account when we do pricing. And that’s consistent, no matter if it feels like it’s a benign environment, if it’s something that feels like it’s changing more now. So I think it’s fair to say we think about a wide range of potential environments that we could be operating in probably less specific to tariffs itself, but just more of the broader economic environment. So it’s something we’re highly mindful of. But I don’t think it changes anything that we do from a normal sort of operation standpoint, I would say.

Q: Got it. And then on the new notice claim rate of 7.5%. Is there some level of unemployment rate that’s contemplated either directly or indirectly? Like how should we kind of think about that across kind of different economic scenarios? Thank you.

A: Yes. Terry, it’s Nathan. I think the 7.5% new notice claim rate is something that we have used for some time barring the fourth quarter where we had the hurricane-related notices. And I think for us, it’s a good level for a wide range of outcomes. Obviously, with the unemployment rate that we’ve had and the other macroeconomic variables, we’ve had consistent favorable reserve development. So we try to set reserves so that they’re not just sufficient in a base case or better environment, but sufficient across a wide range of outcomes. But we don’t target a specific unemployment rate or home price path when we’re setting our loss reserve assumptions. So I think if the economic environment deteriorated, the first thing that would happen is we would likely have less favorable development. And at some point, we’d be closer to that level. But at that point, we would consider whether 7.5% is the appropriate number, whether it needs to be increased. So again, don’t peg to a specific unemployment rate, but feel like we’re establishing reserves not just for kind of good environments, but for a wide range of potential future environments.

Q: Thanks, Doug Harter: Thanks. Hoping you could talk a little bit about kind of volume, you guys have seen a little bit of volatility in market share over the past couple of quarters. Just wondering what you were kind of seeing in the market this quarter that kind of had little bit more of a pullback in your volume than some of your peers?

A: Yes. Thanks. Appreciate the question, Doug. I mean, again, I probably will sound a little bit like a broken record and market share is a little bit of an output of ultimately what’s happened, and we don’t necessarily target a specific spot to be at versus making sure we’re getting good returns. I think it’s safe to say, and I think I’d say probably every call, it’s highly competitive industry, I think you’re going to see a little bit of ebbs and flows from quarter-to-quarter. But I think from an overall standpoint, I think we’ve been in a relatively narrow range. So I don’t think there’s anything thing specific to call out. Again, it can be pricing related, it can be customer related as far as the volume that they’re doing. There’s a number of different things that can sort of play into it. It’s safe to say we monitor that. I don’t think it doesn’t come a surprise to us that we did lose some share this quarter. But I don’t think it’s necessarily a trend.

Q: Got it. Was there any particular areas that, that you kind of saw a bigger pullback, particular customers or types of product or any more detail you could provide around that?

A: Nothing really specific. I mean, if you look at the different sort of dimensions that you look at and that we disclosed, I don’t think there’s any one area that really stands out. I think there can be really minor changes that ultimately impact sort of that share, which again, I think, shows how competitive the industry is.

Q: Great. Appreciate the answers. Thank you.

A: Thank you.

Q: Hey, good morning, guys. This is Bose. Tim, you mentioned that meeting with Bill Pulte, he’s obviously got a lot of things potentially on his plate. Where does sort of mortgage insurance fit? Is that something he feels like there’s any need to address? Or that’s – he’s got a lot of other things to focus on at the moment?

A: Bose, it’s tough to know. I think他 was kind enough to meet with us as an industry. I think it’s something we wanted to do, just to establish the relationship and very much more of a meet and greet, I would say. So I can only go based upon what he said more publicly as far as where his focus is. And I don’t think its MI nor what I expect to be for any FHFA director, quite frankly. But we just really want to establish a relationship and it was much more of a meet and greet. And I think we’ll have a really productive relationship with him as the Director.

Q: Okay. Great. Thanks. And then actually, I don’t think there’s a read through, but I’m just curious the Rocket-Cooper merger, whether you think there’s anything there that potentially impacts the mortgage insurers?

A: I – it’s tough to know exactly how they’ll operationalize everything. But obviously, you’ve got Rocket being a substantial player in this market and Mr. Cooper especially from their servicing platform. I’ve read some of the reports you probably have about some of the benefits that we might be able to achieve from that. But I don’t think there’s any direct impact that I think is a read-through for us or for the MI industry per se. Although, again, it’s something that we obviously follow closely when you have customers that are changing a little bit of how they might do business are coming together.

Q: Okay. Great. Thanks.

A: Okay