MGIC Investment Corporation (MTG), a leading provider of private mortgage insurance, has reported its financial results for the first quarter of 2024, showcasing the strength and resilience of its business model. The company's exceptional performance in the quarter highlights its ability to navigate the evolving mortgage market landscape and deliver consistent value to its shareholders.

Financials

For the first quarter of 2024, MGIC reported net income of $174.1 million, or $0.64 per diluted share. This represents a 13% increase compared to the same period in the prior year, when the company reported net income of $154.5 million, or $0.53 per diluted share. The company's annualized return on equity for the quarter was an impressive 13.7%.

MGIC's strong financial results were driven by a combination of factors, including continued favorable loss reserve development, robust investment income, and disciplined expense management. The company's net investment income for the quarter was $59.7 million, up 21% from the $49.2 million reported in the first quarter of 2023, reflecting the higher investment yields in the current interest rate environment.

The company's underwriting and other expenses, net, decreased by 16% to $59.0 million in the first quarter of 2024, compared to $70.1 million in the same period last year. This reduction was primarily due to a decrease in pension expenses and a decline in expenses related to professional and consulting services.

MGIC's losses incurred, net, for the first quarter of 2024 were $4.6 million, a decrease of $1.9 million compared to the $6.4 million reported in the first quarter of 2023. The company's loss ratio for the quarter was 1.9%, down from 2.7% in the prior-year period, reflecting the favorable loss reserve development.

During the quarter, MGIC wrote $9.1 billion of new insurance, compared to $8.2 billion in the first quarter of 2023. The company's insurance in force (IIF) as of March 31, 2024, was $290.9 billion, down slightly from $292.4 billion a year earlier. The decrease in IIF was primarily due to lower new insurance written, offset by high persistency rates.

MGIC's annual persistency rate, which measures the percentage of its insurance remaining in force from one year prior, was 85.7% as of March 31, 2024, compared to 84.5% a year earlier. The company's management team believes that the high persistency rates are a result of the current interest rate environment, which has reduced the incentive for homeowners to refinance their mortgages.

Capital Position

The company's capital position remains strong, with MGIC's Available Assets under the Private Mortgage Insurer Eligibility Requirements (PMIERs) totaling approximately $5.9 billion as of March 31, 2024, an excess of $2.5 billion over its Minimum Required Assets. MGIC's risk-to-capital ratio was 9.8 to 1 as of March 31, 2024, well below the maximum allowed by state regulators.

During the quarter, MGIC repurchased 4.7 million shares of its common stock for $93.3 million. In April 2024, the company's Board of Directors approved an additional $750 million share repurchase program, demonstrating the company's commitment to returning capital to its shareholders.

Outlook

Looking ahead, MGIC's management team remains cautiously optimistic about the company's prospects for the remainder of 2024. While the mortgage origination market is expected to remain challenging due to higher interest rates and affordability concerns, the company believes that the strong credit quality of its insurance portfolio, coupled with its disciplined underwriting and risk management practices, will continue to drive its financial performance.

In terms of guidance, MGIC expects its 2024 new insurance written to be slightly higher than the $35.2 billion reported in 2023. The company also anticipates that its in-force premium yield will remain relatively flat for the year, as the impact of higher interest rates on persistency is expected to offset the decline in premium rates.

MGIC's management team remains committed to maintaining the company's financial strength and flexibility, as evidenced by its proactive capital management strategies. The company's reinsurance program, which provides $2.2 billion of capital credit under the PMIERs, continues to be an integral part of its risk and capital management strategies.

Conclusion

Overall, MGIC's impressive first-quarter 2024 results and its positive outlook for the remainder of the year demonstrate the company's ability to navigate the evolving mortgage market environment and deliver consistent value to its shareholders. The company's focus on disciplined underwriting, risk management, and capital allocation has positioned it well to capitalize on future opportunities in the private mortgage insurance industry.