• Net Income: $200 million for the third quarter.
• Annualized Return on Equity: 15.6%.
• Insurance In Force: $293 billion, with annual persistency at 85%.
• New Insurance Written: $17.2 billion, up 27% from the prior quarter.
• Share Repurchases: 5.2 million shares for $123 million in the quarter; additional 2.9 million shares for $72 million in October.
• Quarterly Common Stock Dividend: $34 million.
• Adjusted Net Operating Income: $0.77 per diluted share, compared to $0.64 per diluted share last year.
• Favorable Loss Reserve Development: $66 million due to re-estimation of ultimate losses on prior delinquencies.
• Delinquency Rate: Increased to 2.24%, consistent with seasonal trends.
• In-Force Premium Yield: 38.9 basis points, up from 38.4 basis points last quarter.
• Net Investment Income: $62 million, up $1 million sequentially and $7 million from the third quarter last year.
• Total Revenue: $307 million, compared to $305 million last quarter and $297 million last year.
• Operating Expenses: $53 million, down from $55 million last quarter.
• Book Value Per Share: $20.66, up 19% compared to a year ago.
• Capital Returned to Shareholders: $625 million through dividends and share repurchases.
• PMIERs Excess Assets: $2.5 billion at quarter end.

• Warning! GuruFocus has detected 7 Warning Signs with RRX.

Release Date: November 05, 2024

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 net income of $200 million for the third quarter, with an annualized return on equity of 15.6%.
• The company wrote $17.2 billion of new insurance in the quarter, marking a 27% increase from the previous quarter.
• MGIC Investment Corp repurchased 5.2 million shares of common stock for $123 million and paid a quarterly common stock dividend of $34 million, reflecting a 79% payout ratio of the quarter's net income.
• The company's reinsurance program reduced PMIERs required assets by $2.2 billion or 40% at the end of the third quarter, providing diversification and flexibility to their sources of capital.
• MGIC's financial strength and credit ratings were upgraded to A from A- by AM Best, with a revised outlook to stable, reflecting a strong balance sheet and robust risk management framework.

Negative Points

• The housing market remains constrained by limited supply and affordability challenges, compounded by higher mortgage rates.
• The delinquency rate increased by 15 basis points to 2.24% in the third quarter, consistent with seasonal trends.
• Persistency rates are expected to decline slightly from their peak of 86%, potentially impacting future revenue.
• The company anticipates a decrease in PMIERs excess level at year-end due to a $400 million dividend payment and the cancellation of the 2021 quota share.
• MGIC Investment Corp faces potential impacts from recent hurricanes, which could affect delinquency rates in the fourth quarter and beyond.

Q & A Highlights

Q: Was there a change to how you report static pool delinquency curves? A: Yes, we updated the frequency of the data points behind those curves. Previously, we reported on an annual basis, and now we report each quarter. The full-year amounts remain the same, but the curves might look different due to more data points. - Tim Mattke, CEO

Q: Can you provide insights on the performance of the 2022 and 2023 vintages? A: The 2022 vintage is performing marginally worse in terms of new delinquencies compared to 2021 and 2023. However, cumulative cure rates across vintages remain strong, leading to favorable loss reserve development. We expect delinquency rates to increase modestly due to seasonality. - Tim Mattke, CEO

Q: Your new insurance written grew significantly. Is this due to market conditions or strategic positioning? A: We believe the market grew slightly, and we likely gained some market share. Our broad customer base and competitive pricing in the risk-based pricing world contributed to this growth. We focus on long-term returns rather than quarter-over-quarter market share. - Tim Mattke, CEO

Q: What is the impact of recent hurricanes on delinquencies? A: We haven't seen significant impacts yet, but historically, delinquencies from hurricanes have higher cure rates due to federal relief and temporary nature. We will monitor and adjust our reserving approach if necessary. - Tim Mattke, CEO

Q: Can you comment on the profit commission threshold for the new quota share reinsurance (QSR)? A: The profit commission threshold is set at 63% for one book year and 62% for another. The decision to go 40% out of the gate reflects the current market conditions and attractive pricing, allowing us to secure multiyear commitments. - Tim Mattke, CEO

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