MGIC Investment (US:MTG)2023-11-01 18:28Financial Data and Key Metrics Changes - The company reported net income of $183 million, with an annualized return on equity of 15.1% [59] - Earnings per diluted share decreased to $0.64 from $0.81 a year ago, while adjusted net operating income also fell from $0.86 to $0.64 [9][59] - Book value per share increased by 14% year-over-year to $17.37, driven by strong results and share repurchases [11] Business Line Data and Key Metrics Changes - New insurance written (NIW) was $14.6 billion, while insurance in force remained stable at $294 billion [59] - The in-force premium yield was flat at 38.6 basis points, consistent with expectations [48] - Operating expenses decreased to $53 million from $57 million last quarter and $62 million a year ago, with full-year expenses expected to be at the lower end of the $235 million to $245 million range [31] Market Data and Key Metrics Changes - The delinquency inventory increased by 4% to 24,700 loans, remaining historically low [10] - New delinquency notices rose to 12,300 from 10,600 last quarter, but were still 13% below pre-pandemic levels [10] - The company noted that home prices have remained resilient despite affordability challenges, with a tight supply of homes available for sale [43] Company Strategy and Development Direction - The company is focused on capital management, having redeemed $21 million of junior convertible debentures and paid a $300 million dividend to the holding company [44][45] - The strategy includes concentrating reinsurance coverage on recent or future new insurance written [50] - The company aims to navigate a dynamic economic landscape while maintaining financial strength and flexibility [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the housing market's resilience and the potential for long-term mortgage insurance opportunities [43] - The company anticipates an increase in capital return payouts due to improved financial conditions [8] - Management acknowledged the challenges posed by higher interest rates but noted that these rates could positively impact the earnings potential of the investment portfolio in the long term [11] Other Important Information - The company experienced favorable loss reserve development of $48 million, with minimal losses reported this quarter [47][64] - The company has been active in its reinsurance program, including a 30% quota share agreement for policies written in 2024 [67] - The company completed its seventh ILN transaction, providing $330 million of loss protection [87] Q&A Session Summary Question: What is the outlook for capital return? - Management indicated that capital return payouts are expected to increase, with leverage remaining stable [15][52] Question: Can you discuss the pricing environment and competitive dynamics? - Management noted that while the marketplace is competitive, pricing actions taken previously have positioned the company well for good credit quality and returns [94] Question: What are the expectations for new delinquency notices? - Management expects a seasonal increase in new delinquency notices but emphasized that the overall credit environment remains strong compared to pre-pandemic levels [96] Question: How do reinsurance market conditions affect pricing? - Management stated that reinsurance market conditions are improving, which could positively influence pricing and competitiveness in the primary market [98][81]