10-K: MGIC Investment Corporation Reports Strong 2024 Earnings, Boosts Shareholder Returns

MGIC Investment Corporation's 2024 results showcase increased net income and strategic capital management, despite a competitive mortgage insurance landscape.

Summary

• MGIC Investment Corporation's 2024 revenues totaled $1.2 billion.
• The company's primary new insurance written (NIW) reached $55.7 billion.
• Direct primary insurance in force (IIF) was $295.4 billion, and direct primary risk in force (RIF) was $78.8 billion as of December 31, 2024.
• Net income for the year was $763 million, or $2.89 per diluted share, compared to $713 million, or $2.49 per diluted share, in 2023.
• The company expanded its reinsurance program and finalized quota share reinsurance covering the majority of its 2025 and 2026 NIW.
• MGIC paid $750 million in cash dividends from its principal mortgage insurance subsidiary to the holding company, a 25% increase from 2023.
• Approximately $698 million was returned to shareholders through share repurchases and dividends.
• The company ended 2024 with $1.1 billion of cash and investments at the holding company.
• MGIC's financial strength and credit ratings were upgraded by S&P and A.M. Best.
• Operating expenses were reduced by 8% compared to 2023 through streamlining operations and workflow optimization.
• The company's market share (as measured by NIW) was 18.6% in 2024, compared to 16.3% in 2023.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, strategic initiatives, and shareholder returns. While acknowledging risks and challenges, the overall tone is optimistic and confident.

Positives

• Net income increased by 7% year-over-year.
• Diluted income per share increased by 16% year-over-year.
• Investment income increased by 14% year-over-year.
• Operating expenses decreased by 8% year-over-year.
• The company's financial strength ratings were upgraded by both A.M. Best and S&P.
• The company increased dividends paid to the holding company by 25%.

Negatives

• Losses incurred, net, increased from $(20.9) million in 2023 to $(14.9) million in 2024.
• The FHA's market share of low down payment residential mortgages increased from 33.2% in 2023 to 33.5% in 2024, negatively impacting MGIC's NIW.
• The VA's market share of low down payment residential mortgages increased from 21.5% in 2023 to 24.5% in 2024, negatively impacting MGIC's NIW.

Risks

• Downturns in the domestic economy or declines in home prices may result in more homeowners defaulting and our losses increasing.
• Changes in the business practices of Fannie Mae and Freddie Mac could reduce our revenues or increase our losses.
• We may not continue to meet the GSEs mortgage insurer eligibility requirements and our returns may decrease if we are required to maintain more capital in order to maintain our eligibility.
• Because loss reserve estimates are subject to uncertainties, paid claims may be substantially different than our loss reserves.
• State capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis.
• The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance or are unable to obtain capital relief for mortgage insurance.
• The length of time our insurance policies remain in force has a significant impact on our results.
• We are susceptible to disruptions in the servicing of mortgage loans that we insure and we rely on third-party reporting for information regarding the mortgage loans we insure.
• If our risk management programs are not effective in identifying, or adequate in controlling or mitigating, the risks we face, or if the models we use are inaccurate, it could have a material adverse impact on our business, results of operations and financial condition.
• Information technology system failures or interruptions may materially impact our operations and/or adversely affect our financial results.
• We could be materially adversely affected by a cybersecurity breach or failure of information security controls.
• Our underwriting practices and the mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring.
• The premiums we charge may not be adequate to compensate us for our liabilities for losses and as a result any inadequacy could materially affect our financial condition and results of operations.
• Actual or perceived instability in the financial services industry or non-performance by financial institutions or transactional counterparties could materially impact our business.
• We rely on our management team and our business could be harmed if we are unable to retain qualified personnel or successfully develop and/or recruit their replacements.
• Competition or changes in our relationships with our customers could reduce our revenues, reduce our premium yields and / or increase our losses.
• Adverse rating agency actions could have a material adverse impact on our business, results of operations and financial condition.
• We are subject to the risk of legal proceedings.
• Our success depends, in part, on our ability to manage risks in our investment portfolio.
• The inability of our insurance subsidiaries to pay dividends in sufficient amounts would harm our ability to meet our obligations, pay future shareholder dividends and/or make future share repurchases.
• Your ownership in our company may be diluted by additional capital that we raise.
• The price of our common stock may fluctuate significantly, which may make it difficult for holders to resell common stock when they want or at a price they find attractive.
• Wars and/or other global events may adversely affect the U.S. economy and our business.
• Pandemics, hurricanes and other disasters may adversely impact our results of operations and financial condition.
• Reinsurance may be unavailable at current levels and prices, and/or the GSEs may reduce the amount of capital credit we receive for our reinsurance transactions.

Future Outlook

MGIC expects NIW to increase slightly in 2025 compared to 2024 and IIF to remain relatively flat. Net premiums written and earned are expected to decrease in 2025, driven by an increase in ceded premiums. Net investment income in 2025 is expected to be relatively flat in comparison to 2024. Net losses and LAE paid are expected to increase, but the magnitude and timing are uncertain. Underwriting and operating expenses, net are expected to be modestly lower in 2025 compared to 2024. A modest decrease in the effective tax rate is expected in 2025 due to purchases of transferable federal tax credits.

Industry Context

The report provides insights into MGIC's performance within the context of the private mortgage insurance industry, highlighting competition from government agencies like the FHA and VA, as well as alternative risk transfer mechanisms. The report also discusses the impact of GSEs and regulatory changes on the industry.

Comparison to Industry Standards

• The report mentions competitors within the private mortgage insurance industry, including other active mortgage insurers and their affiliates.
• It also discusses competition with government-backed mortgage insurance programs, principally the FHA, VA and USDA.
• The report references Inside Mortgage Finance estimates for market share data, providing a benchmark for MGIC's performance against industry averages.
• The report does not provide specific comparisons to named companies.

Stakeholder Impact

• Shareholders benefit from increased dividends and share repurchases.
• Employees benefit from a commitment to creating a positive co-worker experience.
• Customers benefit from improved technology and customer experience initiatives.
• The company supports affordable housing initiatives and community involvement.

Next Steps

• Continue to execute business strategies focused on maximizing value, differentiating customer experience, leveraging digital capabilities, managing risk, maintaining financial strength, and fostering diversity.
• Monitor and adapt to changes in the mortgage insurance market, including competition, regulatory developments, and GSE policies.
• Manage capital effectively through dividends, share repurchases, and strategic investments.

Key Dates