MGIC Investment Corporation

Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation second quarter earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. I'd now like to hand the conference over to your speaker today, Mr. Mike Zimmerman. Please go ahead.

Thank you. Good morning and thank you for joining us this morning and for your interest in MGIC Investment Corporation. Joining me on the call today to discuss the results for the second quarter of 2020, our Chief Executive Officer Tim Mattke and Chief Financial Officer Nathan Colson. I want to remind all participants that our earnings release of this morning, which may be accessed on MGIC's website, which is located at mtg.mgic.com. Under Newsroom includes additional information about the company's quarterly results that we will refer to during the call and include certain non-GAAP financial measures. We have posted on our website a presentation that contains information pertaining to our primary risk and force and new insurance written and other information which we think you will find valuable. I also want to remind listeners that from time to time we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. that investors and other interested parties may find valuable as well. During the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about those factors, including COVID-19, that could cause actual results to differ materially from those discussed on the call are contained in the Form 8-K and 10-Q that was filed last night. If the company makes any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent development. Further, no interested party should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of the 8K or 10Q. At this time, I'd like to turn the call over to Tim.

Thanks, Mike, and good morning, everyone. I hope everyone who is listening is safe and well. I want to express my gratitude to and admiration for my fellow MGIC coworkers and their families. Their efforts day in and day out over the last several months to support our customers, their local communities, and fellow coworkers while coping with their own unique circumstances brought about by the COVID-19 pandemic have been remarkable, so thank you. The safety and health of our coworkers and their families is a responsibility I do not take lightly. That is why we continue to operate in a remote work environment while we provide critical support to the housing market, especially first-time homebuyers. As we navigate through this unusual period, we continue to execute on our business strategies with a goal to position our company to prosper over the long term. We strive to achieve that goal by, among other things, working with the GSEs and servicers on loss avoidance programs, offering competitive products and services to our customers, and maintaining a sharp focus on the sources and uses of our capital. We think this is the best approach for all stakeholders and is particularly relevant as we manage through the current environment. I will kick off this call by spending a few minutes providing a high-level summary of our financial results for the second quarter and our current financial position. Then Nathan will cover some more details of the financial results. Finally, I will wrap up by discussing the State of Housing finance reform and then open it up for questions. As far as financial results, GAAP net income for the quarter was $14 million. The decrease in net income from prior quarters primarily reflects the increase in loss reserves that we established in response to the material increase in new delinquent loans that were reported to us in the second quarter. Nathan will get into more details in a few minutes. During the second quarter, the volume of both purchase and refinance mortgage originations was very robust. The demand for single-family housing has been very resilient and seems to have actually increased despite the pandemic. Of course, the low interest rate environment makes refinancing very attractive for many borrowers. As a result, we rolled $28 billion of new insurance in the quarter, and despite lower persistency on our existing books of business, our insurance in force increased by approximately 8% year over year. Refinance transactions as a percent for monthly new business writing peaked at approximately 44% in April and May. That was back down to 33% in July as demand for purchase mortgages increased and refinance transactions slowed a bit. The combination of our application data, lender reports, and the MBA indices provide us with reasonable visibility into NIW over the next several months. And while our current pipeline remains robust, there's considerably less certainty about mortgage origination levels or credit performance beyond the near term, given the uncertain impact COVID-19 will have on economic conditions. As a result of that uncertainty, as further discussed in our risk factors and in the 10Q, it is difficult to confidently forecast our future financial results and capital position. Therefore, we will not be providing any guidance about the potential paths or outcomes for insurance and force growth or credit performance, but will continue to provide the market with monthly credit metrics. We entered this period of uncertainty with a book of business that had strong credit characteristics. In addition, we are supported by a balance sheet that has a lowest debt-to-capital ratio 6.3 billion dollars in cash and investments, contractual premium flow, and a robust reinsurance program. Despite the increased number of loan delinquencies and the corresponding increase in minimum required assets required to be held under the private mortgage insurer eligibility requirements of the GSEs or PMIRs, we estimate that at the end of June, our available assets exceeded the minimum required assets by 1.1 billion dollars. In addition, Our policyholder position was $2.9 billion in excess of the minimum state capital requirements. While delinquency notices received in the second quarter were materially higher than the first quarter, there were 38% fewer notices in June than in May. Approximately 67% of our June 30th delinquency inventory and 80% of June new delinquency notices were reported to us as a COVID-19 related forbearance plan. The delinquency rate end of the quarter at 6.35%. Although there remains much uncertainty about the potential impacts to credit performance and our business caused by this national emergency, notably the potential for higher incurred and ultimately higher paid losses, we are encouraged by the July new notice and cure activity. With that, let me turn it over to Nathan.