• Net Income (Q4 2024): $185 million.
• Annualized Return on Equity (Q4 2024): 14%.
• Net Income (Full Year 2024): $763 million, up from $730 million in 2023.
• Insurance in Force (End of Q4 2024): Over $295 billion.
• New Insurance Written (Q4 2024): $16 billion.
• New Insurance Written (Full Year 2024): $56 billion, up 21% from 2023.
• Net Income per Diluted Share (Q4 2024): $0.72, compared to $0.66 in Q4 2023.
• Net Income per Diluted Share (Full Year 2024): $2.89, compared to $2.49 in 2023.
• Favorable Loss Reserve Development (Q4 2024): $54 million.
• Delinquency Rate (Q4 2024): 2.4%, increased by 16 basis points.
• In-force Premium Yield (Q4 2024): 38.6 basis points.
• Book Value per Share (End of Q4 2024): $20.82, up 12% year-over-year.
• Net Investment Income (Q4 2024): $61 million.
• Operating Expenses (Q4 2024): $49 million, down from $55 million in Q4 2023.
• Operating Expenses (Full Year 2024): $218 million, down $19 million from 2023.
• Share Repurchases (Q4 2024): 7.8 million shares for $193 million.
• Common Stock Dividend (Q4 2024): $33 million.
• Dividend from MGIC to Holding Company (Q4 2024): $400 million.
• Remaining Share Repurchase Authorization (As of January 31, 2025): $372 million.

• Warning! GuruFocus has detected 9 Warning Signs with WEC.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MGIC Investment Corp (NYSE:MTG) reported a solid fourth quarter with a net income of $185 million and an annualized 14% return on equity.
• The company wrote $16 billion in new insurance in the fourth quarter and $56 billion for the full year, marking a 21% increase from the previous year.
• MGIC Investment Corp returned approximately $700 million to shareholders through stock repurchases and dividends, representing a 92% payout ratio of the year's net income.
• The company's reinsurance agreements reduced PMIERs required assets by $2.2 million or approximately 40% at the end of the fourth quarter.
• Operating expenses were reduced to $49 million in the fourth quarter, down from $55 million in the same period last year, with expectations for further reductions in 2025.

Negative Points

• The account-based delinquency rate increased by 16 basis points to 2.4% in the fourth quarter, influenced by seasonal trends and hurricane-related delinquencies.
• The impact of Hurricanes Helene and Milton resulted in approximately 700 new delinquency notices, adding uncertainty to future credit performance.
• Despite strong operating results, MGIC Investment Corp noted that opportunities for growing insurance in force have been constrained due to market size.
• The book yield on the investment portfolio was flat quarter-over-quarter, with net investment income slightly down by $1 million sequentially.
• Unrealized loss positions on the investment portfolio increased by $129 million due to rising yields across the treasury curve.

Q & A Highlights

Q: Can you explain the increase in new notice severity and its relation to hurricane-related claims? A: Nathaniel Colson, Executive Vice President, Chief Financial Officer, explained that the increase in new notice severity is due to higher exposures on new delinquencies, particularly from the 2022-2024 vintages, which have higher loan amounts. The hurricane-related claims have a lower initial claim rate, which slightly reduced the overall claim rate for the quarter.

Q: What are the drivers behind the lower operating expenses guidance for 2025? A: Nathaniel Colson noted that the reduction in operating expenses is a result of cumulative changes over the past few years, including aligning resources to customer demands and reducing the workforce through retirements and repositioning. The guidance for 2025 reflects these ongoing efforts, and there is potential for further reductions beyond 2025.

Q: How would GSE reform and potential privatization impact MGIC? A: Timothy Mattke, Chief Executive Officer, stated that while there are various paths GSE reform could take, MGIC's focus is on ensuring the right guardrails are in place. The company believes in the importance of private mortgage insurance in protecting taxpayers and is prepared to participate in discussions to shape the future of the housing finance system.

Q: What factors would lead to a change in the initial claim rate assumption? A: Nathaniel Colson explained that a significant reduction in the initial claim rate would require confidence in a consistently favorable economic environment, similar to recent years. The current rate reflects a historically low level, and MGIC is comfortable with it given the range of possible future economic outcomes.

Q: Can you discuss the trends in debt-to-income ratios and their impact on underwriting? A: Timothy Mattke attributed the higher debt-to-income ratios to affordability challenges due to rising home prices and interest rates. Despite this, other credit characteristics remain stable, and MGIC is comfortable with the risk-return profile, ensuring borrowers have strong FICO scores and employment histories.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.