MGIC Investment (US:MTG)2020-08-05 17:53Financial Data and Key Metrics Changes - GAAP net income for Q2 2020 was $14 million, a significant decrease from $168 million in the same period last year, primarily due to increased loss reserves related to COVID-19 [12][20] - Net premiums earned increased by 1%, while the net premium yield declined to 42.7 basis points from 46.5 basis points year-over-year [20][21] - Net losses incurred were $217 million compared to $22 million for the same period last year, with approximately 58,000 new delinquency notices received compared to 13,000 in the same period last year [24] Business Line Data and Key Metrics Changes - The company wrote $28 billion of new insurance in Q2 2020, with insurance in force increasing by approximately 8% year-over-year despite lower persistency [13] - Refinanced transactions as a percentage of monthly new business writing peaked at approximately 44% in April and May, then decreased to 33% in July as demand for purchase mortgages increased [14] Market Data and Key Metrics Changes - The delinquency rate ended the quarter at 6.35%, with 67% of June 30 delinquency inventory and 80% of June new delinquency notices reported as COVID-19-related forbearance plans [18] - There were 38% fewer delinquency notices in June compared to May, indicating a potential improvement in the delinquency situation [18] Company Strategy and Development Direction - The company continues to operate in a remote work environment while providing critical support to the housing market, particularly for first-time homebuyers [10] - The focus remains on working with GSEs and servicers on loss avoidance programs, offering competitive products, and maintaining a sharp focus on capital management [10][41] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty about future mortgage origination levels and credit performance due to the ongoing impact of COVID-19 on economic conditions [15] - The company entered this period with strong credit characteristics and a low debt-to-capital ratio, with available assets exceeding minimum required assets by $1.1 billion [16][32] Other Important Information - The company did not request or pay a dividend to the holding company in Q2, with future dividend payments to be determined quarterly based on economic conditions [29] - The consolidated cash and investments totaled $6.3 billion at the end of Q2 2020, with a debt-to-total capital ratio of approximately 17% [31][32] Q&A Session Summary Question: What is the total delinquency portfolio from a forbearance standpoint? - Management indicated they are still reviewing forbearance-related information and do not have an update on the composition of new notices in cures relative to forbearance [44] Question: What drove the change in the claim rate assumption from 9% to 7%? - Management noted that the improvement was due to more formalized forbearance options and economic conditions, which benefited the claim rate [46] Question: How is pricing trending in the second quarter? - Management stated they are focused on competitive premium rates while prudently growing insurance in force and long-term value [50] Question: What happens to the 70% discount after the forbearance period? - Management clarified that the 70% haircut applies for at least three months for delinquencies and continues during the forbearance period [57][94] Question: How does the company view the ILN market? - Management expressed that while the terms are less attractive than pre-COVID, they continue to evaluate the market for potential opportunities [58] Question: What is the mark-to-market LTV for older books? - Management indicated that delinquencies have picked up but significantly less than previous years, with mark-to-market LTVs below 70% for older books [60][68]