MGIC Investment Corporation

Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation third quarter 2023 earnings call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Diana Higgins, head of investor relations. Please go ahead.

Thank you, Michelle. Good morning and welcome everyone to our third quarter earnings call. Thank you for joining us this morning and for your interest in MGIC Investment Corporation. Joining me on the call today to discuss our results of the third quarter are Tim Mackey, Chief Executive Officer, and Nathan Colson, Chief Financial Officer. Our press release, which contains MGIC's third quarter financial results, was issued yesterday and is available on our website at mtg.org. mgic.com under newsroom includes additional information about our quarterly results that we will refer to during this call. It also includes a reconciliation of non GAAP financial measures to their most comparable GAAP measures. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk and force and other information you may find valuable. From time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before we get started today, I want to remind everyone that 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 these factors that could cause actual results to differ materially from those discussed on the call today are contained in our 8K and 10Q that were also filed yesterday. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent events. No one should rely on the fact that such guidance or forward-looking statements are current at any other time than the time of this call or issuance of our 8K and 10Q. With that, I now have the pleasure to turn the call over to Tim.

Thanks, Diana, and good morning, everyone. I'm pleased to report that we had another great quarter. We continue to benefit from favorable credit trends, prudent risk management strategies, a disciplined approach to the market, and the talent and dedication of our team. We are focused and committed to creating long-term value for our stakeholders by executing our business strategies and maintaining exceptional financial strength and flexibility. Turning our attention to our financial results, in the third quarter, we earned net income of $183 million and generated an annualized 15.1% return on equity. We wrote $14.6 billion in new insurance written And insurance and force, the main driver of our revenue, stayed strong and hit a quarter at $294 billion. As expected, both the mortgage origination and MI markets are smaller this year, driven by higher mortgage rates, which has challenged affordability and led to fewer homes for sale due to the lock-in effect for borrowers with lower mortgage rates and significantly reduced refinance activity. For our business, those headwinds are somewhat offset by the tailwinds that higher interest rates have on the persistency of our insurance in force. Annual persistency has increased each of the last 10 quarters and ended the third quarter at 86.3%, up from 78.3% a year ago. The net result of lower volumes of new insurance and increased persistency is that our insurance in force has remained relatively flat during the year, consistent with what we expected at the start of the year. Credit performance on our in-force book continues to be a tailwind for our financial results, and our delinquency inventory remains at historic lows. In addition, the new insurance we are writing continues to have strong credit characteristics. Home prices continue to be more resilient than expected despite affordability challenges and higher interest rates. However, the rate of home price growth has slowed in some areas, while others have seen modest declines. I remain optimistic that home prices generally will remain relatively stable. While there is noise in the market, the housing market remains resilient. The supply of homes available for sale is still tight. However, there is pent-up demand, and demographic trends suggest meaningful long-term MI opportunities. During the last few calls, I have discussed pricing actions we took in the third and fourth quarters of last year to address our views of risk and uncertainties in an environment where interest rates had spiked affordability was stretched, and home prices were expected to fall from their peak. I also discussed that our views of the market's risk-return began to gradually improve during the year, and that we expected our market position to also improve gradually during this year, even though our pricing was still meaningfully higher than the pricing we had in the market during the second quarter of last year. As a reminder, the timing between taking action and the resulting NIW is not immediate, as pricing leaves NIW by a month or two. So what you see in our third quarter NIW is primarily a reflection of our views of risk return from late second quarter of this year. As I mentioned on the last call, we believe there is additional improvement in our market position and believe that is reflected in our third quarter NIW. During the quarter and through October, we were very active in our capital management actions. In the third quarter, our share price reached the level where we could redeem our 9% junior convertible to ventures, and we elected to do so. We settled all the debentures with cash, and on September 20th, they were fully retired, which also eliminated 1.6 million potentially dilutive shares. While there was only $21 million of the debentures left at the time of the election to redeem, the full retirement removed the last vestiges of the financial crisis era financing that remained on our balance sheet. Nathan will provide additional details. but we were also very active with our reinsurance program during the quarter and continued our capital return program through both shareholder dividends and share repurchases. In the quarter, we repurchased 3.9 million shares of common stock for $67 million and paid a quarterly 11.5 cents per share common stock dividend for $33 million. In addition, through October 27th, we repurchased an additional 2.2 million shares of common stock for a total of $37 million and the board authorized 11.5 cents per share common stock dividend to be paid November 28th. Consistent with last quarter, our recent share repurchase activity reflects continued strong mortgage credit performance and financial results and share price valuation levels that we believe are very attractive to generate long-term value for remaining shareholders. Earlier this week, MGIC paid a $300 million dividend to the holding company, reflective of the strong capital position of MGIC, and capital levels that continue to be above our target. The dividend from NGIC to the holding company enhances the liquidity position and the financial flexibility of the holding company. With our debt-to-capital ratio in our target range, as the venture is being fully retired, we have completed our planned delivering activities. With the strong credit performance and financial results we are experiencing, combined with a smaller origination market, with slow growth of our insurance and forests, and the related required capital, At the current valuation levels, we expect our capital return payout will increase from the level in recent quarters, and you can begin to see that in our October repurchase activity. With that, let me turn it over to Nathan.