MGIC Investment Corporation

Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation second quarter 2024 earnings call. At this time, all participants have been placed on mute to prevent any background noise. At the end of today's presentation, we'll have a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand has been raised. to withdraw your question please press star 1 1 again please be advised that today's conference is being recorded I'll now turn the conference over to Diana Higgins head of investor relations please go ahead Thank You Andrew good morning and welcome everyone thank you for your interest in MGIC

Joining me on the call today to discuss our results for the second quarter are Tim Mackey, Chief Executive Officer, and Nathan Colson, Chief Financial Officer. Our price release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website at mgic.org. tg.mgic.com under Newsroom also includes additional information about our quarterly results that we will refer to during the call today. 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. As a reminder, from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before getting started today, I want to remind everyone that during the call today, 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 the factors that could cause actual results to differ materially from those discussed on the call today are contained in our 8K and 10Q files yesterday also. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. No one 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 our 8K and 10Q. With that, I now have the pleasure to turn the call over to Tim.

Thank you, Diana, and good morning, everyone. I am pleased to report that we had another solid quarter, and with that, an excellent first half of the year. We have been consistently generating 15 returns on equity while returning meaningful capital to our shareholders and creating long-term value for our stakeholders. Our results demonstrate the strength and flexibility of our business model, prudent risk management strategies, and focus on through-the-cycle performance. Coupled with our ongoing commitment to serve our customers with quality offerings and solutions, we are able to help borrowers achieve the dream of affordable homeownership sooner. Now let's dive into the highlights of our financial results for the second quarter. For the quarter, we earned net income of $204 million and generated an annualized 16% return on equity. Insurance in force, the main driver of revenue, ended the quarter at $292 billion, up slightly in the quarter. Our insurance in force has remained relatively flat over the past several quarters, consistent with what we expected. Annual persistency ended the first quarter at 85%, down slightly in the quarter. We wrote $13.5 billion in new insurance, and new insurance through Wright continues to have strong credit characteristics. Our focus on prudent risk management strategies has enabled us to build and maintain a strong and balanced insurance portfolio. We continue to be very pleased with the overall credit quality and performance of our portfolio. This credit performance continues to be a tailwind for our financial results. As we expected at the beginning of the year, this year's MI market is similar to last year's market. The mortgage origination industry continues to be hindered by the higher interest rate environment, resulting in affordability challenges, and the supply of homes for sale being limited, creating pent-up demand. While the current supply-demand dynamic creates challenges for first-time homebuyers, it continues to support home prices. Pent-up demand and the strong desire of the millennial and Gen Z populations to own homes are reasons to continue to be optimistic about the MI opportunities in the long run. Shifting to our capital activities, the strength and flexibility of our capital position in the quarter supported the repurchase of 7.6 million shares of common stocks for $157 million, and the payment of a quarterly common stock dividend for a total of $31 million. This represents a 92% payout ratio for this quarter's net income. And as previously announced, in the quarter we paid a $350 million dividend from MGIC to the holding company, ending the quarter with $990 million of liquidity at the holding company. In addition, in April, the Board authorized an additional $750 million share repurchase program And last week, the Board authorized a 13% increase to our quarterly common stock dividend to 13 cents per share, marking four consecutive years of dividend increases with a compound annual growth rate of 21% over that period. Maintaining financial strength and flexibility are the cornerstones of our approach to capital management. While we prioritize prudent growth over capital return, opportunities to grow our insurance and force over the last two years have been constrained due to the size of the market. During that same time, operating results and credit performance have been exceptional, leading to higher payout ratios in recent quarters. As part of our capital management, we assess current and expected future operating environments and the best options to supply capital in order to maximize long-term shareholder value. We continually monitor our risk and capital position, and as long as credit performance is excellent and our risk position is stable or improving, I would expect our capital levels to remain above our targets at both MGIC and the holding company, and payout ratios will remain elevated. Taking a step back to a long-term view provides perspective on our ability to grow while maintaining financial strength and managing our capital position. We face a wide range of operating environments over the last five years, and our dynamic approach to capital management, while always prioritizing financial strength and flexibility, has served our stakeholders well. Over the last five years, we have increased our insurance in force by $78 billion, or 36%, from $214 billion to $292 billion. During that same period, we generated $3.4 billion in net income, $3.5 billion in operating cash flows, and gap equity increased by $1.1 billion after returning approximately $2 billion to shareholders through dividends and share repurchases. The combination of 97 million shares repurchased and the elimination of our legacy convertible debt has reduced diluted shares by 30%. The growth of our PMRs excess from $1.1 billion to $2.4 billion during the same five-year period further demonstrates our commitment to maintaining robust financial strength. With that, let me turn it over to Nathan to get into more details on our financial results for the quarter.