MGIC (MTG) Q1 2026 Earnings Call Transcript

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DATE

Thursday, April 30, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Timothy James Mattke
• Chief Financial Officer and Chief Risk Officer — Nathaniel Howe Colson
• Head of Investor Relations — Dianna L. Higgins

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TAKEAWAYS

• Net Income -- $165 million reported, resulting in an annualized return on equity of 13%.
• Book Value per Share -- $23.63, representing a 10% increase year over year.
• New Insurance Written (NIW) -- $14 billion, up 41% and the largest first-quarter NIW since 2022, primarily driven by higher refinance activity and a modestly larger purchase market.
• Insurance in Force -- Ended the quarter flat sequentially and up 3% year over year, with annual persistency at 84%, down from 85% last quarter.
• Favorable Reserve Development -- $31 million realized from lower-than-expected losses on prior delinquencies, driven by higher cure rates on delinquency notices received in 2025.
• In-Force Premium Yield -- 38 basis points, flat sequentially and consistent with internal projections.
• Investment Income -- $62 million, flat sequentially and year over year, with a book yield near 4% and reinvestment rates above book yield.
• Underwriting and Other Expenses -- $48 million, down from $53 million in the same period last year; full-year operating expenses expected between $190 million and $200 million.
• Share Repurchases -- 7.2 million shares bought back for $193 million this quarter; $750 million repurchased over the prior four quarters.
• Common Stock Dividends -- $35 million paid this quarter; $138 million paid over the prior four quarters.
• Capital Return Payout -- Combined share repurchases and dividends over the prior four quarters equaled 123% of net income earned during that period.
• Additional Share Repurchase Authorization -- $750 million authorized by the board last week for further repurchases.
• Reinsurance Program Impact -- Reduced PMIERs required assets by $3.1 billion, or approximately 52%, at quarter end.
• Dividend to Holding Company -- A $400 million dividend paid from MGIC to the holding company, enhancing overall liquidity.
• Delinquency Rate -- Increased 14 basis points year over year and 1 basis point sequentially; attributed to less pronounced seasonal benefit and reporting timing from large servicers.
• Refinance Share of NIW -- Reached approximately 21%, up from 6%, but persistency remained elevated at 84%-85%.
• Board-Approved Dividend -- $0.15 per share common dividend payable on May 21.

SUMMARY

Management stated that housing affordability remains a challenge, with private mortgage insurance positioned as a key enabler for low down payment borrowers. The company expressed active support for FHFA advances in credit score modernization and collaboration with GSEs and lenders on integrating VantageScore 4.0 and FICO Score 10T. Leaders clarified that accumulated other comprehensive income (AOCI) is not a central factor in determining capital return, emphasizing statutory capital and PMIERs requirements instead. Early payment defaults remain low, and the portfolio's credit performance has not shown a material change.

• Timothy James Mattke said, "We prioritize prudent insurance in force growth over capital return," indicating management's focus on sustainable portfolio expansion despite constrained growth conditions.
• Nathaniel Howe Colson noted that "the delinquency rate and the level of new notices to continue to normalize," highlighting a potential gradual upward trend tied to the current vintage mix.
• Management confirmed their ongoing advocacy for responsible policy solutions to improve housing affordability within the industry.
• The board's recent actions on capital deployment show commitment to long-term shareholder value through balanced repurchases, dividends, and reserve preservation.

INDUSTRY GLOSSARY

• NIW (New Insurance Written): The total principal amount of newly insured mortgage loans during the reporting period.
• PMIERs: Private Mortgage Insurer Eligibility Requirements; regulatory standards governing minimum capital levels for mortgage insurers as set by the GSEs.
• Persistency: The percentage of insurance in force retained over a specified period, reflecting policyholder retention and loan refinancing dynamics.
• Delinquency Notice: Notification from a loan servicer that a borrower has missed required payments, triggering risk assessment and reserve adjustments for insurers.
• AOCI (Accumulated Other Comprehensive Income): An equity line item reflecting unrealized gains or losses on certain investments and instruments, excluded from statutory capital calculations for regulatory assessment.

Full Conference Call Transcript

Dianna L. Higgins: Thank you, Kelly. Good morning, and welcome, everyone. Thank you for your interest in MGIC Investment Corporation. Joining me on the call today to discuss our results for the first quarter are Timothy James Mattke, Chief Executive Officer, and Nathaniel Howe Colson, Chief Financial Officer and Chief Risk Officer. Our press release, which contains MGIC Investment Corporation’s first quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom. It 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 in force and other information you may find valuable. As a reminder, from time to time, we may post information on 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 course of this call, we may make comments about our expectations of the future. Actual results could differ from those contained in these forward-looking statements. Our 8-Ks and 10-Q filed yesterday include additional information about the factors that could cause actual results to differ materially from those discussed on the call today.

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 8-K or 10-Q. With that I now have the pleasure to turn the call over to Timothy James Mattke.

Timothy James Mattke: Thanks, Dianna, and good morning, everyone. I am pleased to report a strong start to 2026 as we continue to execute our business strategies while maintaining the momentum we have built over the past several years. Our performance demonstrates the strength of our business model, disciplined market approach, and long-standing commitment to meeting the evolving needs of our customers and the broader market, a commitment we have maintained since 1957. For the first quarter, we generated net income of $165 million, delivering an annualized return on equity of 13%. Our solid operating performance combined with the strength of our balance sheet drove book value per share to $23.63, an increase of 10% year over year.

Turning to NIW, we wrote $14 billion of new insurance in the first quarter, an increase of 41% from last year and our largest first quarter of NIW since 2022. The increase was driven by higher refinance activity as well as what we expect was a modestly larger purchase market. Insurance in force at the end of the first quarter stood at approximately [inaudible], relatively flat quarter over quarter and up 3% from a year ago, with annual persistency ending the quarter at 84%, down from 85% last quarter. Both insurance in force and annual persistency are aligned with our expectations entering the year. Overall, we continue to expect our insurance in force to remain relatively flat in 2026.

If mortgage rates were to decline more than currently predicted, we would expect the size of the MI market to benefit from increased refinance activity, although the growth in insurance in force would be offset by lower persistency, which is consistent with what happened in the first quarter to some degree. We continue to be pleased with the overall credit quality and performance of our portfolio. Our underwriting standards remain strong, and to date, we have not seen a material change in the credit performance of our portfolio. Early payment defaults remain low, which we believe is a positive indicator of near-term credit trends.

Our capital structure remains robust, with $6 billion of balance sheet capital, and a well-established reinsurance program with a large panel of highly rated reinsurers continues to be a core component of our risk and capital management strategy. These reinsurance agreements reduce loss volatility in stress scenarios while providing capital diversification and flexibility at attractive costs. At the end of the first quarter, our reinsurance program reduced our PMIERs required assets by $3.1 billion, or approximately 52%. Our capital management approach remains unchanged. We prioritize prudent insurance in force growth over capital return.

Market conditions have constrained insurance in force growth in recent years, and against that backdrop, our capital return activity reflects our robust position, continued strong credit performance and financial results, and share price levels that we believe are attractive to generate long-term value for our shareholders. Consistent with our commitment to disciplined capital allocation and long-term shareholder value, last week, the board authorized an additional $750 million share repurchase program. We actively monitor capital levels of both MGIC and the holding company, carefully balancing the amount of capital we return to shareholders with what we retain to preserve financial strength and resilience across a range of macroeconomic environments.

In doing so, we consider both current conditions and expected future operating environments, continually evaluating the most effective ways to allocate capital to drive long-term shareholder value, an approach that has served our shareholders well. Consistent with this approach, earlier this week MGIC paid a $400 million dividend to the holding company, enhancing holding company liquidity and overall financial flexibility. With that, let me turn it over to Nathaniel Howe Colson to provide more details on our financial results and capital management activities for the first quarter.

Nathaniel Howe Colson: Thanks, Tim, and good morning. As Tim discussed, we had solid financial results for the first quarter. We earned net income of $0.76 per diluted share compared to $0.75 per diluted share last year. Our re-estimation of ultimate losses on prior delinquencies resulted in $31 million of favorable loss reserve development in the quarter. This favorable development was primarily due to delinquency notices received in 2025. Cure rates on those delinquency notices have exceeded our expectations, and we have adjusted our ultimate loss expectations accordingly. As a quick reminder, delinquency notices we receive during a quarter span across various book-year vintages.

For the delinquency notices we received in the quarter, we continue to apply the initial claim rate assumption of 7.5%. Looking at delinquency trends, our account-based delinquency rate increased 14 basis points year over year and 1 basis point in the quarter. Seasonal trends, which are historically a tailwind to mortgage credit performance in the first quarter, were less pronounced this year. Cures on new notices remain strong, and we expect the delinquency rate and the level of new notices to continue to normalize. Overall, both the number of new notices and the delinquency rate remain low by historical standards. The in-force premium yield was 38 basis points in the quarter, flat sequentially and consistent with what we expected.

With another year of high persistency expected, and MI origination trends similar to last year, we continue to expect the in-force premium yield to remain relatively flat during the year. Investment income totaled $62 million in the first quarter, flat sequentially and year over year, as the book yield on our investment portfolio has been approximately 4% for the last year. During the quarter, reinvestment rates on our fixed-income portfolio continued to exceed our book yield, but our capital return activities have limited the growth in the investment portfolio and the resulting investment income. Underwriting and other expenses in the quarter were $48 million, down from $53 million in the first quarter last year.

We remain focused on disciplined expense management. We continue to expect operating expenses for the full year to be in the range of $190 million to $200 million, as I shared in February. In the quarter, we continued to allocate excess capital to share repurchases, which totaled 7.2 million shares for $193 million. We also paid a quarterly common stock dividend of $35 million. Over the prior four quarters, share repurchases totaled $750 million and shareholder dividends totaled $138 million. Combined, they represented a 123% payout of the net income earned over the period. In the second quarter, through April 24, we repurchased an additional 1.7 million shares of common stock for a total of $47 million.

In addition, the board approved a $0.15 per share common stock dividend payable on May 21. These actions are all consistent with our capital allocation approach. With that, let me turn it back over to Tim.

Timothy James Mattke: Thanks, Nathan. A few additional comments before we open it up for questions. Housing affordability remains a challenge for many prospective homebuyers. Private mortgage insurance plays a critical role in supporting housing affordability by enabling low down payment borrowers to enter the market and achieve homeownership sooner. We remain actively engaged in industry discussions and regularly advocate for responsible policy solutions that improve affordability. Last week, FHFA announced advances in credit score modernization, and that the GSEs are moving forward with VantageScore 4.0 and FICO Score 10T with the intent of lowering costs for borrowers.

We are fully supportive of these credit score modernization advances and are actively working with the GSEs, lenders, and their technology partners to operationalize these changes. In closing, our first quarter results reflect consistent execution of our business strategies and disciplined capital allocation. With our strong foundation and deep industry expertise, we remain well positioned to navigate dynamic environments and create long-term shareholder value. We will now open the call for questions.

Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Terry Ma: Hey, thank you. Good morning. I want to start with credit. Any color you can provide on the trends you saw this quarter? The default rate was up 1 basis point quarter over quarter versus the normal seasonality of down. Just curious if you can provide any color there.

Nathaniel Howe Colson: Yes, Terry, it is Nathan. Thank you for the question. It is something that we looked into quite a bit this quarter. While I think broadly we did not see as much seasonal benefit as we have in recent years in the first quarter, there were a couple of unique items that we identified relative to the timing within the month that certain large servicers provide their delinquency information. As a practical matter, we get delinquency reporting beginning on the sixteenth of the month for loans that have two missed payments.

The earlier in the month that servicers report, the more new notices they are likely to report just because those borrowers have had only sixteen days in the month to make a payment. We had a couple of servicers that gave us reporting earlier in March than they had in prior periods, so that may have accelerated or increased a little bit the amount of new notices and decreased the cures that we have seen. We do not have full April information yet, but from what we have seen so far in April, those trends look favorable and more in line with what we would have expected.

Time will ultimately tell, but it did seem like there were a couple of unique items in the quarter. At the end of the day, long-term cure rates still are very attractive and have not shown much sign of slowing down, which has led to us consistently releasing reserves and having favorable development. All in all, I think the credit picture is still quite favorable.

Terry Ma: Got it, that is helpful. As a follow-up, would the servicer reporting issue also impact roll rates? As I look at those between the buckets, those are also a little bit worse on a year-over-year basis. And then maybe just taking a step back, any commentary on how you are thinking about the level of gas and energy prices and how it may impact your borrowers?

Nathaniel Howe Colson: I will take those. Certainly the same reporting for new delinquencies that I talked about is also the reporting for cure activity on previously reported items, so that could definitely have an impact. We are coming off historically good levels, especially for long-term cure rates, so we have always expected some normalization, and that may be happening to some degree. Even post the COVID crisis, we have noticed that earlier-period cure rates—one month, three months, six months—are running at lower levels than we saw pre-COVID, but later-stage cure rates—twelve months, eighteen, twenty-four—are much better, which is ultimately leading to a lot of that favorable development that I mentioned. The servicer reporting timing does impact both new notices and cures.

Relative to energy prices and general price levels and the impact on consumers and on borrowers that we insure, any macroeconomic headwind is something that we are conscious of and think a lot about. To date, I do not think we have seen a lot of direct impact. Certainly, the power of interest rates—we saw that with refinance activity—more than 20% of our NIW with rates still not meaningfully below 6%. I do think that rates drive activity and behavior in our space a lot more than maybe higher prices for certain goods. It is something that we will actively monitor.

The rate of unemployment is a key factor for us, but wage growth has still been strong and nominal GDP continues to run very high, so those are offsetting factors. Again, it is always an uncertain macroeconomic environment, and we try to maintain from a credit policy perspective, underwriting perspective, and a balance sheet and capital position that give us flexibility to react to whatever macroeconomic environment comes next.

Terry Ma: Got it. Thank you for the color.

Operator: One moment for our next question. Thank you. Our next question comes from the line of Bose Thomas George of KBW. Your line is now open.

Bose Thomas George: Hey, guys. Good morning. Just on capital return, last year your payout ratio was 124%. It sounds like it is similar in the first quarter. Last year, looking at your capital, the AOCI reversal helped keep the capital fairly flat. That was not the case in the first quarter. So the question is, does AOCI play a role in how you think about the payout ratio, or will it continue at this level even if it pushes up leverage a little bit?

Timothy James Mattke: Hey, Bose. It is Tim. It is a good question. Generally, we do not really think about AOCI as something that impacts our thoughts about capital return. It is much more of a GAAP concept, and we are looking at statutory and PMIERs. Obviously, we are focused on what might be happening with the investment portfolio, but again, those are viewed as temporary and unrealized, and we normally hold those to maturity. So that is noise. It impacts book value per share, but from a capital return perspective it is not a major consideration in our discussions.

Bose Thomas George: Okay. So given your comments on the insurance in force being fairly flat, this is kind of a reasonable payout ratio for at least this year?

Timothy James Mattke: Yes. With all the caveats we put out about performance, the macroeconomic environment—those are things that we pay close attention to in determining whether we should continue at the pace that we have been. Assuming those things stay relatively consistent with how they have been in the past, we have been very comfortable with the rate at which we have been returning capital.

Bose Thomas George: Great. And then just on the positive development this quarter, it looks like a bigger portion than usual came from loss severity. Anything to call out there, or is that just noise?

Nathaniel Howe Colson: I do not think there is anything specific to call out there. We did see a little bit of a decline in the exposure on new notices, but some of that has to do with which loans are curing and the exposure on the inventory. We have kept our reserving approach relative to exposure pretty consistent, so I think that is more about the underlying loans—what is curing, what is remaining—than any active change that we made.

Bose Thomas George: Okay. Great. Thanks.

Nathaniel Howe Colson: Thanks.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from the line of Mihir Bhatia of Bank of America. Your line is now open.

Mihir Bhatia: I wanted to start by going back to some of the questions around credit that Terry was talking about. I think you mentioned that you expect normalization of delinquency rates to continue. The portfolio has changed a little bit over time and with regulations, too. Can you help us with where you expect the delinquency rate to stabilize and what the path to get there looks like from here?

Nathaniel Howe Colson: Thanks, Mihir. I think there are a couple of dependencies. For the last couple of years—this is not exact, but we have been between a 10 and 15 basis point year-over-year increase in the delinquency rate. That feels very consistent with normalizing credit conditions. We also have a unique book historically right now where we have a significant amount of our in force that is three, four, five, six years aged, and those are typically higher delinquency periods. Often they are not a significant portion of the in-force book because so much of those books have run off. That is not the case today.

If that continues, we would expect gradual upward movement in the delinquency rate if the 2020–2023 books persist as they have. If we get into a rate environment where we are resetting a lot of the book toward more recent vintages—if rates were to go down and we were to write a lot more new business—that would be a tailwind for the delinquency rate. So part of the answer depends on what happens to rates and how much new business we write.

The environment where the existing loans persist—even if the delinquency rate continues to tick up modestly—is a really good environment for us because we get the renewal premium on those loans, and that has been the way the last couple of years have gone for us with very good results. We can do well in either environment. In one environment, there is probably more pressure on premium rates because we would be resetting a lot of loans; refinances are typically lower LTV, lower DTI, higher FICO, so we would be resetting a lot of the premium to lower levels, but the delinquency rate would benefit.

In an environment that continues to persist, there is probably more upward pressure on the delinquency rate, but we continue to get the renewal premium off those vintages, which is also attractive for us.

Mihir Bhatia: Got it. Along those lines, you mentioned refinances have ticked up—it is up to about 21% of NIW—but your premium rate outlook is steady and persistency has stayed elevated. Your refinance share of NIW has gone from roughly 6% to 20%, but persistency is basically 84%–85% still. What is driving that dynamic, and where would persistency trend from here?

Nathaniel Howe Colson: There was a slight decline in the persistency rate during the quarter, and again this is an annual measure. Refinance activity was a little elevated in the fourth quarter, but we have seen that taper off since then. If refinance activity remained at a 20% level of NIW, I do think that would work its way into the premium yield that we are seeing, and persistency would continue to tick down. If we look at what we would term the persistency run rate—just looking at the quarterly activity—it is closer to 80% than 84%.

Our expectations now, with rates where they are today—more in the 6.25% to 6.5% range—we are seeing a falloff in refinance activity, and that is more in line with our expectations of a slightly larger purchase market and that a lot of the refinance activity for the year may be behind us. If that is not correct—if rates go down and there is a lot of refinance activity—then you would see lower persistency, higher NIW, and potentially, depending on how much volume it is and which loans are refinancing, slight headwinds to the in-force premium yield.

But our expectations are for rates in and around where they are now and for moderation in refinance activity in the second quarter and the second half of the year.

Mihir Bhatia: Got it. One last question and then I will jump back in the queue. In terms of new notice severity, it has increased a little bit sequentially. Are you seeing any vintage-specific pressures? Maybe also talk about early performance of the 2024 through 2026 vintages. Anything you are seeing there that makes you pause?

Nathaniel Howe Colson: The number one driver of our new notice severity assumption is the exposure—the risk associated with the new delinquencies. As we have gotten relatively fewer delinquencies from the 2008-and-prior vintages with lower loan amounts, and more from the 2023–2025 period with much higher loan amounts, the average loan size and thus the average exposure is higher. The changing vintage mix—moving closer to today’s values—is far and away the driver of that increase versus anything regional or any change in our assumptions.

Mihir Bhatia: Got it. Thank you for taking my questions.

Operator: There are no further questions. I will now turn the call back over to management for closing remarks.

Nathaniel Howe Colson: Thanks, Kelly.

Timothy James Mattke: I want to thank everyone for your interest in MGIC Investment Corporation. We will be participating in the BTIG Housing and Real Estate Conference and the KBW Virtual Real Estate Finance and Technology Conference in May. I look forward to talking to all of you in the near future. Have a great rest of your week.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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