MGIC Investment (US:MTG)2026-02-03 16:02Financial Data and Key Metrics Changes - The company reported a net income of $169 million for the fourth quarter, resulting in an annualized return on equity of 13% [5] - For the full year, net income reached $738 million, with a return on equity of 14.3% [6] - Book value per share increased to $23.47, reflecting a 13% year-over-year growth [6] - Insurance in force grew to over $303 billion, a 3% increase from the previous year [7] - The in-force premium yield remained stable at 38 basis points [14] Business Line Data and Key Metrics Changes - The company wrote $17 billion in new business during the fourth quarter and $60 billion for the full year, marking an 8% increase from the prior year [8] - The average credit score at origination for the insurance portfolio was 748, indicating solid credit quality [8] Market Data and Key Metrics Changes - The consensus mortgage origination forecasts suggest that the size of the mortgage insurance market in 2026 will be similar to that of 2025, with elevated mortgage rates expected to persist [8] - Annual persistency remained stable at 85% throughout 2025, aligning with initial expectations [7] Company Strategy and Development Direction - The company aims to maintain a strong, well-diversified insurance portfolio while focusing on disciplined risk management and capital management strategies [9][10] - The reinsurance program was strengthened with a $250 million excess of loss transaction and a 40% quota share transaction covering most of the 2027 new insurance written [10] - The company emphasizes the importance of private mortgage insurance in enhancing housing affordability and plans to engage with industry stakeholders to support responsible policy changes [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position and ability to execute business strategies in 2026 and beyond, despite challenges in housing affordability [20] - The company noted that while there is potential for increased refinance volume if mortgage rates decrease, this could lead to lower persistency [8][59] Other Important Information - The company returned $915 million to shareholders through dividends and share repurchases, reducing shares outstanding by 12% [17] - The quarterly common stock dividend was increased by 15% in the third quarter, marking five consecutive years of dividend growth [17] Q&A Session Summary Question: Any price competition or changes in the industry? - Management noted that premiums remained stable and they were able to find value without major adjustments in premiums [25][26] Question: Any updates on potential reduction in FHA premiums? - Management indicated that while affordability discussions are ongoing, there is no imminent indication of a reduction in FHA premiums [27][28] Question: Insights on credit trends by region or state? - Management reported no significant geographic movement in new delinquencies, with no areas of concern identified [30][32] Question: Comparison of reserve releases to previous quarters? - Management explained that reserve releases are based on the comparison of initial estimates to current best estimates, with recent quarters reflecting different notice ages [33][36] Question: Composition of new delinquencies and their vintages? - Management stated that there has been no significant divergence in cure activity based on vintage, with recent vintages performing better than pre-COVID levels [40][42] Question: Any levers to improve returns on capital? - Management highlighted the importance of a robust reinsurance program to enhance returns on equity, especially in a challenging market environment [46][47] Question: Impact of refinance activity on premium rates? - Management noted that while premium rates have been stable, the impact of refinancing could lead to lower premiums for new loans [49][50] Question: Expectations for default rates in 2026 and 2027? - Management suggested that while there may be modestly higher delinquency rates in newer vintages, the overall market conditions are expected to stabilize [60][62]