MGIC Investment Corporation (NYSE: MTG) Q4 2025 Earnings Call dated Feb. 03, 2026
Corporate Participants:
Diana Higgins — IR
Timothy Mattke — Chief Executive Officer
Nathaniel Howe Colson — Executive Vice President and Chief Financial Officer
Analysts:
Bose George — Analyst
Terry Ma — Analyst
Douglas Harter — Analyst
Giuliano Bologna — Analyst
Mihir Bhatia — Analyst
Presentation:
operator
Good day ladies and gentlemen and thank you for standing by. Welcome to the MGIC Investment Corporation fourth quarter 2025 earnings call. this time, all lines have been placed on mute to prevent any background noise. At the end of today’s presentation, we’ll have a question and answer session. If anyone should require to ask a question at this time, please press star one one on your telephone keypad. At this time, I would like to turn the conference over to Diana Higgins, Head of Investor Relations. Please go ahead.
Diana Higgins — IR
Thank you, Howard. Good morning and welcome everyone. Thank you for your interest in mgic. Joining me on today’s call to discuss our results for the fourth quarter are Tim Mackey, Chief Executive Officer and Nathan Colson, Chief Financial Officer and Chief Risk Officer. Our press Release, which contains MGIC’s fourth quarter financial results was issued yesterday and is available on our website@mtg.mgic.com under newsroom. Includes additional information about our quarterly results that we will reference during today’s call as well as a reconciliation of non GAAP financial measures to their most comparable GAAP measures. In addition, we posted a quarterly supplement on our website that provides details about our primary risk in force and other information you may find valuable.
As a reminder, from time to time we may post updates to our underwriting guidelines, additional presentations or corrections to past materials on our website. Before we get started today, I want to remind everyone that during today’s call we may make forward looking statements regarding our expectations for the future. Actual results could differ materially from those expressed in these forward looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed in today’s call is included in our 8k filed yesterday. If we make any forward looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent events.
No one should rely on the fact that such guidance or forward looking statements are current at any time other than the time of this call or the issuance of our 8K. With that, I now have the pleasure of turning the call over to Tim.
Timothy Mattke — Chief Executive Officer
Thank you, Diana and good morning everyone. We delivered another quarter of solid financial results, closing 2025 strong and entering the new year from a position of strength. This performance is a continuation of the sustained momentum we’ve built over the past several years. Our performance stems from being grounded in decades of experience across a wide range of market cycles, disciplined risk management and a thoughtful, measured approach to the market. We pair our expertise with a customer centric mindset continually evolving to meet the changing needs of our customers and the broader market. Turning to a few financial highlights, in the quarter, we earned net income of $169 million, producing an annualized 13% return on equity.
For the full year. We earned net income of $738 million and a full year return on equity was 14.3%. Our strong operating performance and robust balance sheet enabled us to grow book value per share to $23.47, 13% higher year over year. As I mentioned on last quarter’s call, we are proud to have achieved a significant milestone in our company’s history and the industry first during the year, surpassing $300 billion of insurance in force. We continue to grow insurance in force in the fourth quarter, ending the year with more than $303 billion, up 3% from a year ago.
Annual persistency remained elevated and stable throughout 2025, ending the quarter at 85% in line with our expectations at the start of the year, we wrote $17 billion of high quality new business in the fourth quarter and $60 billion for the full year, an increase of 8% from the prior year. Consensus Mortgage Origination Forecasts Project the size of the mi market in 2026 will be relatively similar to 2025 with mortgage rates remaining elevated. Overall, we expect insurance and forest to remain relatively flat in 2026. If mortgage rates were to decrease more in 2026 than currently predicted, we expect the size of the MI market would benefit due to increased refinance volume, but growth in insurance and force would be offset by lower persistency.
Our focus remains on building and maintaining a strong, well diversified insurance portfolio. Credit quality of our insurance portfolio remains solid with an average credit score at origination of 748. To date, we have not seen a material change in the credit performance of our portfolio and early payment defaults remain low, which we believe is a good indicator of near term credit trends. As discussed throughout the year, financial strength and flexibility are the cornerstones of our capital management strategy, positioning us to perform well across a range of economic environments. As part of our strategy, we regularly evaluate capital levels of both the operating company and holding company, taking into account current and potential future environments to position ourselves for success, an approach that has consistently served our stakeholders well.
As part of this, we continue to bolster our reinsurance program through the use of forward commitment quota share agreements and excess of loss agreements executed in either the traditional reinsurance or capital markets. In addition to reducing loss volatility and stress scenarios, these agreements provide capital diversification and flexibility at attractive costs. We remained active in the reinsurance market in the fourth quarter and in January. In the fourth quarter, as previously announced, we further strengthened our reinsurance program with a $250 million excess of loss transaction covering our 2021 NAW and a 40% quota share transaction that will cover most of our 2027 NIW.
We also amended the terms of our quota share treaties covering our 2022 NIW with most participants from the existing reinsurance panel reducing the ongoing cost by approximately 40% beginning in 2026. In addition, in January we completed our eighth insurance like no transaction, which provides $324 million of loss protection and covers certain policies written between January 2022 and March 2025. These reinsurance activities are aligned with our long term strategy and reflect our consistent, disciplined approach to managing risk and capital. At the end of the fourth quarter, our reinsurance program reduced our PMIers required assets by $2.8 billion for approximately 47%.
With that, let me turn it over to Nathan to provide more details on our financial results and capital management activities for the quarter.
Nathaniel Howe Colson — Executive Vice President and Chief Financial Officer
Thanks, Tim and good morning. As Tim mentioned, we had another quarter of solid financial results. We earned net income of $0.75 per diluted share compared to $0.72 during the fourth quarter last year. For the full year, we earned net income of $3.14 per diluted share compared to $2.89 per diluted share last year. Our RE estimation of ultimate losses on prior Delinquencies resulted in $31 million of favorable loss reserve development in the quarter. The favorable development was primarily driven by delinquency notices we received in 2024 and in the first half of 2025. As cure rates on recent new notices continue to exceed our expectations for new delinquency notices received in the quarter, we continue to apply the initial claim rate assumption of 7.5%.
Consistent with recent periods, our count based delinquency rate increased 3 basis points from the prior year and 11 basis points in the quarter. The sequential increase was in line with our expectations and reflects normal seasonal patterns as well as the continued aging of our 2021 and 2022 book years. As we have discussed on prior calls, the three basis point year over year increase was the slowest rate of increase since the first quarter of 2024 and we believe reflects the continued normalization of credit conditions that we have discussed throughout the year. Turning to our revenue, the in force Premium yield was 38 basis points in the quarter and remained relatively flat during the year consistent with what we expected at the start of the year.
Given expectations of a similar MI market to 2025, we expect the in force premium yield to remain near 38 basis points again in 2026. Investment income totaled $62 million in the fourth quarter and again contributed meaningfully to revenue. The book yield on Our investment portfolio was 4% at the end of the quarter. Investment income remained relatively flat sequentially and year over year as both the book yield and the size of the investment portfolio have also remained relatively flat. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed. Our book yield remained relatively flat for the year.
The unrealized loss position on our portfolio narrowed again this quarter by $16 million, primarily driven by lower interest rates. Underwriting and other expenses in the quarter were $46 million, down from $49 million in the fourth quarter last year. For the full year, expenses were $201 million, down $17 million from 2024 and within the $195 to $205 million range we shared throughout the year. We remain committed to disciplined expense management and ongoing operational efficiency across the organization. For 2026, we expect operating expenses to decline further to a range of 190 to 200 million dollars due primarily to higher expected seating commissions as we have recently renegotiated several seasoned quota share reinsurance treaties instead of canceling those treaties.
Turning. To our capital management activities consistent with our approach over the past several years, we prioritize prudent insurance in force growth over capital return over the past several years, market conditions have constrained the growth of our insurance in force. Against that backdrop, our capital return activity reflects our robust capital position, continued strong credit performance and financial results, and share price levels that we believe are attractive to generate long term value for our shareholders. In the fourth quarter, we paid a quarterly common stock dividend of $33 million and repurchased 6.8 million shares of common stock for $189 million.
For the full year, we returned $915 million of capital to our shareholders through a combination of share repurchases and dividends and reduced shares outstanding by 12%. This represents a 124% payout ratio of the year’s net income and our quarterly dividend increased by 15% in the third quarter, marking five consecutive years of dividend. In January, we repurchased an additional 2.7 million shares of common stock for a total of $73 million. In addition, in January, as previously announced, the Board approved the quarterly common stock dividend of $0.15 per share payable on March 6th. All of these actions were taken while continuing to strengthen our balance sheet and enhance flexibility during the year.
We paid $800 million in dividends from MJFC to the holding company during the year, ending the year with $1 billion of liquidity at the holding company and an excess to PMIers of $2.5 billion at the operating company. With that, let me turn it back over to Tim.
Timothy Mattke — Chief Executive Officer
Thanks Nathan. As the founder of Modern Private mortgage insurance nearly 70 years ago, we strived to be the most trusted and transparent partner in the MI industry. We are proud of the critical role private MI plays in the housing finance system. We look forward to continuing to work with industry stakeholders including the FHFA and the GSES to responsibly serve low down payment borrowers, expand the use of private mi, protect the taxpayers from mortgage credit risk and help shape the future of housing finance system. With that said, housing affordability remains a challenge for many prospective home buyers.
We continue to actively participate in industry discussions and support responsible policy changes that improve affordability. The passage of the Working Families tax cut restored the tax deductibility of MI premiums, providing meaningful tax relief to homeowners without increasing risk to the housing finance system. In addition, the cost of private mortgage insurance premiums represents a temporary expense. Unlike other ongoing homeownership costs such as homeowners insurance and property taxes which have risen significantly, Private mortgage insurance plays an important role in enabling low down payment borrowers to enter the market and achieve the American Dream of homeownership sooner. In closing, we had a strong year successfully executing our business strategies and returning meaningful capital to our shareholders.
I’m confident in our talented team, our position in the market, as well as our ability to continue executing and delivering on our business strategies in 20, 26 and beyond to create long term value for all of our stakeholders. With that, Howard, let’s take questions.
Questions and Answers:
operator
At this time, please press Star 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 11 again. Again, if you have a question or comment at this time, please press Star 11 on your telephone keypad. Please stand by while we compile the Q and A roster. Our first question or comment comes from the line of Bose George from KBW. Mr. George, your line is open.
Bose George
Hey guys. Good morning. First, I wanted to ask about any price competition or changes you’re seeing in the industry. I mean, based on your comments, it sounds like premiums are very stable, but just wanted to confirm that.
Timothy Mattke
Yeah, I think both I mean, I think, you know, we don’t like to comment too much on industry pricing generally, but I think from our perspective, you know, we were able to sort of find the value where we wanted it this quarter, similar to what we’ve been seeing for the majority of the year, without having, you know, major sort of adjustments in our. In our premium, you know, in the quarter. So I think we feel good about that. Again, we focus on the returns ultimately and what we can get, but felt pretty good stability there.
Looking back the last quarter.
Bose George
Okay, great, thanks. And then switching over to sort of regulatory stuff, the market seems quite worked up about a potential reduction in FHA premiums. Have you seen anything from the FHA itself or from the administration that suggests that is a possibility?
Timothy Mattke
I always view, when it comes to affordability and sort of looking at different levers, I always view it as a possibility. I don’t get the sense that it’s viewed as any more possible or any more works being done specifically on it right now than sort of making sure they understand sort of the different levers that can be pulled. So, again, it’s really tough to sort of try to put odds on it, other than I would say that I don’t get the sense that there is any increasing sort of discussion and people we’ve talked with about it, other than I think whenever you look at affordability, we know that certain constituencies will advocate for reducing the FHA premium, and that always creates external pressure, but haven’t seen anything just to believe that that is imminent.
But that can change quickly in this world. Right.
Bose George
Okay, great. Thanks.
operator
Thank you. Our next question or comment comes from the line of Terry Marr from Barclays. Mr. Marr, your line is open. Mr. Ma. You may be muted.
Terry Ma
Hey. Yes, sorry, I was muted. Good morning. Thank you. Hey, I was interested to see if you could provide kind of any color on kind of credit trends that you’re seeing kind of by region or state.
Nathaniel Howe Colson
Terry, it’s Nathan. I’ll take that one. We do look at the mix of new delinquencies that we’re seeing on a monthly basis and really haven’t seen much in the way of movement on a geographic basis, whether it be state or even at the market level. You know, I think when we look at the mix of new notices from, you know, the first quarter, the second quarter, the third quarter compared to the fourth, you know, not seeing states that are really standing out one way or the other, I think there’s. There’s always some noise, especially with the relatively low level of New notices that we have.
You know, some of the jurisdictions have relatively small numbers, so it can be a little bit noisier. But as a kind of percent of the total, really not seeing areas that are standing out or areas of concern for us right now.
Terry Ma
Got it. That’s helpful. And then on the reserve release in the quarter, appreciate the color on kind of makeup, but can you maybe just kind of remind us how that compares to the makeup or the drivers of the release that you’ve had in the last few quarters? I know, not a great way to look at it, but at least the magnitude of the release was noticeably lower than what you saw the last few quarters.
Nathaniel Howe Colson
Yeah. Terius. Nathan, again, I think the way that we’ve approached reserving and the way that then the reserve releases have kind of mechanically worked is unchanged. We’re always comparing our initial estimates to what we now think is the best estimate. In our business, cures come earlier than claims. So early cures don’t give you as much new information about ultimate losses. So from what we’re seeing a couple quarters ago, we would have seen reserve development coming out of maybe notices that we had received 2, 3, 4, 5 quarters before. And it kind of keeps moving forward as time advances.
So I would say the quarters where development is coming from are different, but mostly because we’re just further in time. So we had development say on the notices from the first half of 2025, we wouldn’t have had that say in Q2, but it would have been from the back half of 24, those notices that had been aged for two or three quarters. And that’s not a rule or anything. For us, it’s really looking at how many are curing, what is the monthly pace and quarterly pace at which they’re curing, how closely are they following previously identified trends in cure activity and really where do we think it will ultimately play out and continue to be re estimating down new notice quarters from our initial estimates of 7 and a half percent down into the lower single digits.
Terry Ma
Got it. That’s helpful. Thank you.
Nathaniel Howe Colson
Thank you.
operator
Thank you. Our next question or comment comes from the line of Doug Harder from UES. Mr. Harder, your line is now open.
Douglas Harter
Thanks. I guess along those lines of the. Last question, can you just talk about the composition of the nods and kind of what vintages those are coming from and kind of as we get to the newer vintages with less hpa, how do you think that might be? They impact cures.
Nathaniel Howe Colson
Yeah, Doug, it’s Nathan. I think on the cures side really haven’t seen a lot of divergence in cure activity based on vintage. I think perhaps the 2022 vintage is at the lower end of the range as we would look at cure rates by vintage for delinquent loans but still all within, I’d say a pretty tight band and much better than pre Covid levels. The long term cure rates are really what are driving the ultimate reductions in our ultimate loss expectations. I think not seeing much on the cure rate side on the delinquency emergence. We have got a couple tables and charts in the supplement.
One of them does look at delinquency rates over time by vintage and you can see 2022 is running modestly higher than 21 or 20 or even 2019. But the recent vintages are all tracking very close to that or inside of that. So again I think this is all consistent in our mind with the normalization in credit conditions coming off of early post Covid conditions that just led to, you know, very very low losses for those vintages.
Douglas Harter
Great. For sure that answer.
operator
Thank you. Our next question or comment comes from the line of Giuliano Bologna from Compass. Mr. Bologna, your line is open.
Giuliano Bologna
Congrats on your execution and especially on the expense management side when I look forward to next year. Obviously you put out the 190 to 200 range for underwriting and operating expenses. I’d be curious especially looking at this environment, are there any other levers that you could pull to improve returns on capital at least in the near term? I realized the environment’s relatively tough when insurance enforcement is barely growing or expected to be roughly flat. I’m curious what other levers you might have that you could pull to push some incremental margin at this point.
Nathaniel Howe Colson
It’S Nathan. I’ll get started on that. I think the biggest thing that we’ve done this year really in anticipation of a normalization in credit conditions and the movement away from what has been close to zero losses for the last couple years is really getting the reinsurance program really bolstered with really attractive costs on our in force book. But increasingly covering our future new business. You know, 2026 and 2027 NIW is now covered. And when you think about return on capital, we often think about that as return on pmiers capital and the reinsurance at the cost that we’re able to procure.
It does provide us better returns on equity than we earn on a return on capital basis. And that’s why I think capital management for us is so important. And it’s not just the capital return side of it. It’s also how we’re constructing our capital balance sheet for our regulatory capital measures, our risk based capital measures, rating agencies and the like. And increasingly that has taken on an even heavier reinsurance lien partly because of the attractiveness of that market and the tail risk protection that it provides, but partly because we do think that that is the best way to continue to earn kind of good risk adjusted returns on equity.
Giuliano Bologna
That’s very helpful and then maybe just partially addressed, but obviously during the pickup and refinancing activity and kind of the expected continuation of that, it’s somewhat disproportionately impacting or disproportionately impact your high WAC coupons that you have out there. I’m curious, is there a big divergence in the premium rates some of your Covid year lower WAC insurance and force versus some of the more recent ventures that seem to be that are being much more exposed to refinance activity at the moment. And should that impact your average premium rate throughout the year?
Nathaniel Howe Colson
Yeah, it’s an interesting question. Premium rates on average have been relatively flat for the last five or six years. You can see that in our in force premium yield. The really low coupon books that we wrote in 2020 and 2021 had much lower credit risk at origination characteristics. So all else equal, they would have had lower premium rates. There’s a lot of refinance activity in those books, whereas the more recent higher coupon books have been purchase dominated, you know, higher ltv. Still really good credit profile, especially from a credit score perspective. But, but I don’t think that, I think it’s less about maybe the vintage effect and more if we’re already insuring a loan, if that refis into something that has a lower capital charge and lower kind of ad origination credit characteristics, all else equal, we get lower premium for that loan in a risk based pricing market.
Giuliano Bologna
That’s very helpful. I appreciate that and I will jump back in the queue.
Nathaniel Howe Colson
Thank you.
operator
Thank you. Our next question or comment comes from the line of Mehir Bhatia from Bank of America. Your line is now open.
Mihir Bhatia
Good morning. Thank you for taking my questions. The first one I wanted to ask was just about in force premium yield. It declined a touch this quarter after being steady for most of 25. What drove that?
Nathaniel Howe Colson
Yeah, here it’s Nathan, you know, it was down a couple tenths of a basis point and I think, you know, that’s just, I think for us, you know, within the margin of flat, it does Fluctuate a little bit. I think you know we wrote more business in Q4 than we would have otherwise anticipated due to refinance activity. So that increases the ending in force but it doesn’t add to premium because we don’t collect premium often in the first month. It’s really starts in the second month. So I think you’re dealing with some really situations like that versus there being any substantive change in the mix of the in force or the premium dollars on a direct basis were up.
So I think it probably has more to do with the insurance in force dollars going up at the end such that the average is a little bit higher and drove the yield lower. But again those things often will normalize over more than a quarter.
Mihir Bhatia
Got it. And then I guess somewhat related but in your prepared remarks you talked about insurance enforce staying flat even if you even if the market ends up being a little bigger because you think you’ll have a maybe a give back if you will on persistency. That didn’t happen this quarter. So I guess maybe just talk a little bit about that. Why do you think it would happen at least early on in the early stages of a rate cut potentially or a larger market just given that didn’t happen in fourth quarter where you wrote more in Iaw but persistency stayed pretty high.
Timothy Mattke
Yeah, I think nir it’s Tim I think it’s all within sort of a range of outcomes. I think what we want to make sure that we are clear about is that when refi activity normally it’s. Refi. That happens from MI into MI and that there’s going to be downward pressure on persistency. And so just if there’s more NIW volume it doesn’t just inert a sort of a total increase in insurance in force. So yeah we did have a slight increase this quarter could call it with an increase in sort of refi activity. Pretty substantial increase refi activity. But it’s a very I’d say marginal sort of increase in our insurance in force. And so I think just trying to make sure they temper the expectations appropriately that even if interest rates fall and the majority of the pickup in volume is from refi activity that that has downward pressure on It.
Mihir Bhatia
And then maybe just I’ll just wrap with this one just in terms of credit trends from here, anything we should be keeping in mind as we think about default rate as we look at 26 and 27, just even from a vintage size perspective, are we through the peak years for the last vintages? Does vintage size maybe become A bit of a good guy for DQ rate from here given persistency, staying elevated. Just any thoughts there on this default rate? Thanks.
Nathaniel Howe Colson
Here it’s Nathan. I think that’s possible. Our expectations now are for a pretty similarly sized market and with home price appreciation being relatively modest, the dollar growth that we’ve enjoyed in certain years, even if the units weren’t growing as much, we don’t think we’ll be as strong. So it does feel like we’re off of the lows though in terms of the new business that we wrote say in 23 or 24. It also feels like there’s maybe more upside risk to NIW than downside at this point given, given the refi volume we saw when rates went directionally lower but not that much lower just into the low sixes generated a lot of refi activity.
So that could definitely become something that is a benefit to the in force delinquency rate. But I think as we’re seeing it today, the next couple of vintages are maybe modestly higher. So any impact like that would be relatively modest.
Mihir Bhatia
Got it. Thank you. Thank you for taking my questions.
operator
Thank you. I’m sure. No additional questions in the queue at this time. I’d like to. I’m sorry, we do have the follow up question from Mr. Bose George from KBW. Mr. George, your line is open.
Bose George
Hey guys, thanks for the follow up. Actually for the modeling the ceded premium number going forward, like what’s a good run rate for that? The impact on the premium.
Nathaniel Howe Colson
I think many of the lines for Cedar Premium and we have this in our, in our earnings release and in the supplement. I think the challenging one to model is the profit commission on the quota share deals because as we have higher losses, we’re ceding those losses to the quota share deals but then earning less profit commission. So the answer to that question is quite a bit dependent on your expectations around future losses. And that’s something that we haven’t given guidance on and don’t intend to going forward just because the nature of our business and the potential variability there.
But if it’d be helpful to work through the mechanics of the profit commission, happy to follow up offline too.
Bose George
Okay. And just to understand, so the increase in the feeded premiums this quarter was a reflection of that was a reflection of a change in the profit commission, is that right?
Nathaniel Howe Colson
That’s largely the case. You know, the profit commission was down about $4 million sequentially and that’s really because we ceded additional losses under the quota share agreement. So from a net cost perspective. It doesn’t have an impact. We’re getting it back on the loss line, but it does impact premium line. And we do have the profit commission broken out separately for each quarter, so you can see that. But it was down, like I said, about $4 million in the quarter.
Bose George
Okay. Okay, great. Thanks.
Nathaniel Howe Colson
Thank you.
operator
I’m sure. No additional questions in the queue at this time. I’d like to turn the conference back over to management for any closing remarks.
Timothy Mattke
Thank you, Howard. I want to thank everyone for your interest in mdic. We will be participating in the UBS and B of A Financial Services conferences next week. I look forward to talking to all of you in the near future. Have a great rest of your week.
operator
Thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone. Have a wonderful day. Speakers, stand by.