MGIC Investment Corporation

Thank you for standing by. Welcome to the MGIC Investment Corporation first quarter 2021 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. and please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. And I would now like to hand the conference over to your speaker today, Mike Zimmerman, Senior Vice President, Investor Relations. Please go ahead.

Thanks, Laurie. 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 first quarter of 2021 are Chief Executive Officer Tim Mattke and Chief Financial Officer Nathan Colson. I want to remind all participants that our earnings release of last evening, which may be accessed on our 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 It includes the reconciliation of non-GAAP financial measures to their most comparable GAAP measures. We have posted on our website a presentation that contains information pertaining to our primary risk and force, new insurance written, reinsurance transactions, and other information which we think you'll 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 should be aware of. 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 Form 10-Q that were 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 developments. 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 Form K or 10-Q. At this time, I'd like to introduce Tim Mattke.

Thanks, Mike. Good morning, everyone. I'm pleased to report that we produced another quarter of very strong financial results. After my opening remarks, Nathan will provide more detail about those financial results and about our capital position. Then, before we open the line for questions, I will wrap up by discussing the current operating environment, including activities related to housing policy. During the quarter, we earned GAAP net income of $150 million, which reflects the strong credit profile and performance of our insurance and force, the favorable housing and mortgage market trends, improving economic conditions, and our market presence. For some time now, our main business objective has been to use our resources to provide critical support to the housing market, especially first-time and low and moderate income homebuyers. We strive to achieve that objective by, among other things, providing competitive offerings and best-in-class service to mortgage originators and servicers, and by maintaining a sharp focus on the sources and uses of our capital. This strategy has allowed us to capitalize on the strong demand for single-family housing. Our new insurance-ridden, or NIW, continued to be weighed more heavily towards the purchase transactions versus refinance transactions, accounting for 60% of our NIW in the first quarter. While interest rates were higher in the first quarter than at times in 2020, they are still very attractive for many borrowers, whether to purchase a home or to refinance, and our industry continued to enjoy a relatively larger market share of refinances than in prior periods. These strong housing and mortgage market conditions led to another very busy quarter for our customers, and as a result of this, in our market presence, we wrote nearly $31 billion of NIW in the first quarter. While the first quarter provided a strong start for new business in 2021, we do expect that higher interest rates and the recent gains in property values will slow the volume of refinance transactions available to insure. In fact, we have begun to see the mix shift towards more purchase transactions in our application pipeline, a leading indicator of NIW with purchase transactions making up more than 75% of the applications in recent weeks. The level of new business we wrote in the quarter more than offset the pressure of lower annual persistency on our existing book of business caused by refinance activity and resulted in our insurance and force growing to $252 billion, more than 11% higher than the same period last year. While the supply of housing inventory available for purchase is low, We still expect robust purchase market conditions to continue as demand remains strong. I expect that those conditions will continue to allow our insurance and force to grow, although perhaps at a slower annual rate than we have been enjoying in recent quarters. Reflecting the underlying economic conditions, the quality of our existing book of business, and the number of new delinquency notices received, our loss ratio declined to 15.5% in the quarter. I continue to be encouraged by the trends we are seeing in the credit performance, including the delinquency rate, which continues to decline as fewer loans become delinquent and existing delinquent loans continue to cure. This trend continued through April where we saw our lowest level of new delinquency notices in more than a decade with strong cure activity on previously delinquent loans. As a result of credit performance, reinsurance transactions, and continued strong cash from operations, we estimate that the spread of our PMIRES available assets over PMIRES minimum required assets increased by approximately $500 million in the quarter and that our PMIRS efficiency ratio was 169% at the end of the quarter. While we stay keenly focused on maximizing the near-term business opportunities and navigating the outstanding COVID-related challenges, we remain focused on the long-term success of the company. We have a strong balance sheet, we are confident in our position in the market, and we like the risk-reward equation that the current conditions offer. With that, let me turn it over to Nathan.