8-K: MGIC Investment Corporation Reports Strong Fourth Quarter 2024 Results, Driven by Solid Underwriting and Capital Management

MGIC Investment Corporation announces a net income of $184.7 million for the fourth quarter of 2024, driven by strong underwriting performance and effective capital management.

Summary

• MGIC Investment Corporation reported a net income of $184.7 million, or $0.72 per diluted share, for the fourth quarter of 2024.
• Adjusted net operating income for the quarter was $184.5 million, or $0.72 per diluted share.
• For the full year 2024, net income reached $763.0 million, or $2.89 per diluted share.
• Adjusted net operating income for the full year was $768.5 million, or $2.91 per diluted share.
• New insurance written (NIW) for the fourth quarter totaled $15.9 billion, compared to $10.9 billion in the same quarter of the previous year.
• Net premiums earned were $241.3 million for the quarter, up from $226.4 million in Q4 2023.
• Insurance in force reached $295.4 billion at the end of 2024.
• The company's annual persistency rate was 84.8%.
• The primary delinquency inventory was 26,791, with a delinquency rate of 2.40%.
• The company paid a dividend of $0.13 per common share and repurchased 7.8 million shares for $193.3 million during the quarter.
• MGIC paid a dividend of $400 million to the holding company.
• A 40% quota share reinsurance transaction was agreed upon, covering most of the 2025 and 2026 NIW.
• In January 2025, the company repurchased an additional 3.5 million shares for $85.5 million.
• A dividend of $0.13 per common share was declared, payable on March 5th, 2025.
• As of December 31, 2024, MGIC's Available Assets totaled $5.8 billion, or $2.2 billion in excess of its Minimum Required Assets.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, active capital management, and confidence from the CEO. However, there are also risks and challenges mentioned, preventing a perfect score.

Positives

• Strong financial results for both the fourth quarter and full year 2024.
• Increased new insurance written (NIW) compared to the previous year.
• Active capital management through dividend payments and share repurchases.
• Agreement on a 40% quota share reinsurance transaction to manage risk.
• MGIC is in compliance with the PMIERs and eligible to insure loans purchased by the GSEs.
• Holding company liquidity is strong at $1,076 million.

Negatives

• Annual persistency decreased slightly from 86.1% in Q4 2023 to 84.8% in Q4 2024.
• Primary delinquency inventory increased to 26,791 from 25,650 in Q4 2023.
• Net gains (losses) on investments and other financial instruments were negative.

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 private 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.
• We are subject to comprehensive regulation and other requirements, which we may fail to satisfy.
• 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.
• State capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis.
• If the volume of low down payment home mortgage originations declines, the amount of insurance that we write could decline.
• 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.

Future Outlook

Tim Mattke, CEO, expressed confidence in the company's ability to execute its business strategies and achieve success for all stakeholders in the new year, citing a solid foundation, market leadership, and a talented team.

Management Comments

• As we close another year on a high note with strong financial results in the fourth quarter while returning meaningful capital to our shareholders, I am looking forward to the opportunities that lie before us in the new year.
• With the solid foundation we have built, our leadership in the market, and our talented team, I remain confident in our ability to execute on our business strategies and achieve success for all of our stakeholders.

Industry Context

The report reflects the performance of MGIC within the private mortgage insurance industry, which is influenced by factors such as housing market conditions, interest rates, and the regulatory environment. The company's results are indicative of the overall health and stability of the mortgage market and its ability to manage risk effectively.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• However, the document does mention that the GSEs require approved insurers to maintain at least one rating with a rating agency acceptable to the respective GSEs.
• MGIC's financial strength rating from A.M. Best is A (with a stable outlook), from Moodys is A3 (with a positive outlook) and from Standard & Poors is A(with a stable outlook).

Stakeholder Impact

• Shareholders will benefit from dividend payments and share repurchases.
• Lenders will have access to mortgage insurance to facilitate low-down-payment mortgages.
• Homebuyers will have increased access to affordable homeownership.
• Employees will benefit from the company's continued success and stability.

Next Steps

• The company will hold a conference call on February 4, 2025, to discuss the quarterly results.
• The company will continue to execute its business strategies and manage capital effectively.
• The company will monitor and adapt to changes in the housing market, regulatory environment, and competitive landscape.

Key Dates