MGIC Investment (US:MTG)2022-11-04 04:43Financial Data and Key Metrics Changes - The company reported GAAP net income of $250 million for Q3 2022, compared to $158 million in the same period last year, representing a 58% increase [18] - Adjusted net operating income was $0.86 per diluted share, an 87% increase from $0.46 per diluted share in Q3 2021 [18] - Insurance in-force increased to over $293 billion, a 9.4% increase year-over-year and a 2.4% increase from Q2 2022 [8] - Book value per share decreased slightly to $15.16 from $15.18 at the end of 2021, but increased from $14.81 a year ago [19] Business Line Data and Key Metrics Changes - The loss ratio was negative 41.7% for the quarter, reflecting favorable loss reserve development [9] - Net premiums earned were $252 million, down from $255 million in the same period last year, primarily due to an increase in ceded premiums [21] - The in-force premium yield was 39.0 basis points, down 0.4 basis points during the quarter [21] Market Data and Key Metrics Changes - The volume of mortgage originations has continued to decline due to rising interest rates, impacting the overall market opportunity for new private mortgage insurance [13] - Persistency increased to approximately 76% at the end of the quarter, up from 72% at the end of Q2 2022 [14] Company Strategy and Development Direction - The company aims to support the housing market by facilitating affordable homeownership [6] - A dynamic capital management strategy is in place, focusing on prudent capital allocation and maintaining a strong capital position [11] - The company has entered into various reinsurance agreements to mitigate losses and enhance returns [12] Management's Comments on Operating Environment and Future Outlook - Management noted that affordability challenges and rising interest rates are putting downward pressure on home prices, but the strong credit quality of recent book years should help reduce claims [15] - The company expects new insurance written volume to remain high by historical standards but below the record levels of the past two years [13] Other Important Information - The company repurchased 6.1 million shares for $84 million and paid a quarterly dividend of $0.10 per share [10][26] - A $400 million dividend was paid from the operating company to the holding company, enhancing liquidity [27] Q&A Session Summary Question: Thoughts on pricing given macro uncertainties and competitor actions - Management emphasized the need to price accordingly in uncertain environments and remains focused on return expectations [34] Question: Expectations for capital returns pace - Management indicated that while share repurchases will continue, they will not all be directed towards that, maintaining a prudent level of liquidity [35] Question: Update on buyback and debt reduction - Management stated they are at their debt-to-capital target and will consider retiring remaining convertible debentures if opportunities arise [39] Question: Future persistency expectations - Management anticipates persistency could trend towards 80% but does not expect it to exceed historical highs [41] Question: Changes in consumer behavior regarding appraisals - Management noted no significant changes in consumer behavior affecting persistency [44] Question: Reduced potential for dividends from the holding company - Management indicated that the uncertain outlook may affect future dividends, with capital needs being evaluated continuously [47] Question: Expense outlook for the next year - Management expects expenses to be at the high end of the previously stated range due to performance-based compensation and other factors [50] Question: Potential for investment yields to exceed 4% - Management indicated that reinvestment rates are currently above 4%, and if conditions remain stable, yields could approach that level in two years [53]