MGIC Investment (US:MTG)2026-02-02 21:04Financial Performance - Fourth Quarter 2025 net income was $169.3 million, or $0.75 per diluted share, compared to $184.7 million, or $0.72 per diluted share in Q4 2024[2][22] - Full Year 2025 net income totaled $738.3 million, or $3.14 per diluted share, reflecting a decrease from $762.99 million, or $2.89 per diluted share in 2024[2][22] - For the three months ended December 31, 2025, the adjusted pre-tax operating income was $211,547 thousand, compared to $234,454 thousand for the same period in 2024, reflecting a decrease of approximately 9.7%[24] - The net income per diluted share for 2025 was $0.75, an increase from $0.72 in 2024, representing a growth of about 4.2%[25] - For the twelve months ended December 31, 2025, the adjusted pre-tax operating income was $928,612 thousand, down from $975,623 thousand in 2024, indicating a decline of approximately 4.8%[26] - The total assets as of December 31, 2025, were $6,639,486 thousand, an increase from $6,547,235 thousand in 2024, marking a growth of about 1.4%[29] - The total liabilities increased to $1,491,935 thousand in 2025 from $1,374,860 thousand in 2024, reflecting an increase of approximately 8.5%[30] Insurance Metrics - New insurance written (NIW) for Q4 2025 was $17.1 billion, an increase from $15.9 billion in Q4 2024[5] - Insurance in force reached $303.1 billion, up from $295.4 billion in Q4 2024[5][10] - The primary insurance in force (IIF) reached $303.1 billion in Q4 2025, up from $295.4 billion in Q4 2024, representing an increase of about 2.5%[32] - New primary insurance written (NIW) for Q4 2025 was $17.1 billion, compared to $15.9 billion in Q4 2024, indicating a growth of approximately 7.5%[31] - The annual persistency rate was 84.8%, consistent with Q4 2024[5] - The annual persistency rate for 2025 was 84.8%, slightly down from 85.0% in 2024[32] Shareholder Returns - The company returned $915 million to shareholders in 2025 through dividends and share repurchases[3] - A dividend of $0.15 per common share was declared for shareholders, payable on March 6, 2026[8] Claims and Losses - Losses incurred in Q4 2025 were $31.2 million, significantly higher than $8.7 million in Q4 2024, resulting in a loss ratio of 13.2%[5] - The GAAP loss ratio for Q4 2025 was 13.2%, significantly higher than the 4.5% reported in Q3 2025, indicating increased claims relative to premiums[37] - The primary IIF delinquency rate rose to 2.43% in Q4 2025, compared to 2.32% in Q3 2025, indicating a worsening trend in loan performance[34] - The net paid claims for Q4 2025 were $16 million, an increase from $14 million in Q3 2025, representing a 14.3% rise[35] - Total gross loss reserves reached $475 million in Q4 2025, up from $452 million in Q3 2025, marking a 5.1% increase[35] Reinsurance and Risk Management - The company executed a $250 million reinsurance coverage transaction effective December 1, 2025, and a 40% quota share reinsurance transaction for eligible NIW in 2027[8] - The percentage of new insurance written (NIW) subject to reinsurance was 86.2% in Q4 2025, slightly down from 88.2% in Q3 2025[37] - The company has various reinsurance transactions in place that reduce premiums but have a lesser impact on overall results[100] Market and Regulatory Environment - The company faces uncertainties regarding the future role of GSEs and FHA in the housing finance system, which could impact business operations[46] - Regulatory changes or actions could have a material adverse effect on the company's reputation and financial results[57] - The company is currently in compliance with PMIERs but risks non-compliance if Available Assets fall below Minimum Required Assets[48] - Changes in GSE pricing and guaranty fees could lead to increased costs for borrowers, impacting the company's competitiveness[43] - The FHA's market share of low down payment residential mortgages was 33.5% in 2024, up from 33.2% in 2023, indicating a competitive landscape for private mortgage insurance[75] - The VA's market share for low down payment residential mortgages was 24.5% in 2024, consistent with previous years, highlighting ongoing competition[76] Operational Risks - The company relies on third-party reporting for mortgage loans, which may lead to inaccuracies affecting financial results[86] - The company is susceptible to disruptions in mortgage loan servicing, particularly from non-bank servicers, which could affect liquidity and operational efficiency[80] - Cybersecurity breaches pose a significant risk, with potential for financial losses and damage to reputation[94] - The company relies on information technology systems for operations, and failures in these systems could materially impact business and financial results[89] Competitive Landscape - The mortgage insurance industry is experiencing increased competition, with a potential new market entrant expected to begin writing mortgage insurance in 2026, which may adversely impact the company's results[115] - The company's competitive position may be impacted if it fails to develop and maintain technologies that meet changing customer preferences, particularly in AI and machine learning[119] Investment and Financial Risks - The company's investment portfolio is subject to credit and interest rate risks, which could lead to reduced returns or material losses, impacting overall profitability[124] - Changes in interest rates could negatively affect the company's investment income and operating results, with declining rates reducing returns on new fixed investments[125] - The company is subject to regulatory approval for dividend payments, which could impact its ability to meet cash requirements and obligations[131] Customer Concentration - The company's top ten customers accounted for approximately 32% and 37% of new insurance written (NIW) in 2025 and 2024, respectively, with the largest customer contributing about 16% and 21% of NIW in the same years[117]