MGIC INVESTMENT CORP (MTG)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 results were solid but down sequentially: diluted EPS $0.72 vs $0.77 in Q3; total revenues rose 6.2% y/y to $301.4M, with underwriting expense ratio improving to 20.8% from 24.6% y/y, while the loss ratio rose to 3.6% (seasonality and hurricane impact) .
• Credit performance remained favorable: favorable prior-period reserve development ($54M) and claim-rate assumptions held near ~7% on new notices; delinquency rate increased to 2.40% partly due to hurricanes (≈6 bps effect) but remains low historically .
• Capital return stayed elevated: Q4 buybacks of 7.8M shares ($193.3M) and $0.13 dividend; in January 2025, an additional 3.5M shares were repurchased ($85.5M); book value per share rose 12% y/y to $20.82 .
• 2025 setup: management guided 2025 operating expenses to $195–$205M and expects in‑force premium yield to remain relatively flat; a new 40% quota share reinsurance will cover most 2025–2026 NIW, and the 2021 QSR was amended to reduce cede rate to 26% .
• Catalyst watch: expense guidance cut, continued aggressive buybacks/dividend, and reinsurance optimization are supportive; watch delinquency normalization and hurricane-related effects on near-term loss metrics .

What Went Well and What Went Wrong

• What Went Well

  • “We ended the year on a high note with solid fourth quarter financial results… consistently generated mid‑teen ROE while returning meaningful capital to our shareholders.” — CEO Tim Mattke .
  • Strong capital return: Q4 share repurchases of 7.8M ($193.3M) and $0.13 dividend; January 2025 repurchases of 3.5M ($85.5M) .
  • Expense discipline: underwriting expense ratio improved to 20.8% (vs 24.6% y/y); 2025 OpEx guided to $195–$205M, with room for further improvement over time per CFO .

• What Went Wrong

  • Sequential EPS moderation: $0.72 vs $0.77 in Q3 as loss ratio moved to 3.6% from negative levels; total revenues dipped q/q and net premium yield eased to 32.9 bps (from 33.4) .
  • Delinquencies rose: primary delinquency rate increased to 2.40% from 2.24% in Q3 (seasonal uptick + ~6 bps from hurricanes Helene/Milton) .
  • New‑notice severity ticked up due to mix (larger exposures in 2022–2024 vintages), though management targets a consistent severity-to-exposure ratio .

Financial Results

Non‑GAAP: Adjusted net operating income was $184.5M ($0.72/diluted), essentially equal to GAAP; reconciling items were de minimis investment gains/losses in the quarter .

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and tone (prepared remarks)
  • “We consistently generated mid‑teen returns on equity while returning meaningful capital to our shareholders… our business strategies and the strength of our business model allows us to be successful in varying economic environments.” — CEO .
  • “We wrote $56B of NIW for the full year, up 21%… early payment defaults remain at very low levels… payout ratio ~92% of this year’s net income” — CEO .
  • “We expect the in‑force premium yield to remain relatively flat again in 2025… 2025 operating expenses will be lower again to a range of $195M–$205M.” — CFO .
  • “Multiyear 40% quota share transaction… and amended the 2021 QSR reducing cede rate from 30% to 26%, achieving ~50% reduction in ongoing costs.” — CFO .

Q&A Highlights

• Claim rates and severity: New‑notice claim rate adjusted to 7.3% to reflect higher expected cures on hurricane‑related delinquencies; severity ticked up due to mix (larger exposures in 2022–2024 vintages), while severity-to-exposure targeting remains consistent .
• Expense outlook: 2025 OpEx guidance (~$200M midpoint) reflects cumulative efficiency gains (lower outside services, workforce realignment, process/IT changes); management sees potential for further improvement over time .
• Housing/GSE policy: Management sees resilient housing and pent‑up demand; regarding GSE reform, they stress the importance of guardrails and the role of private MI in protecting taxpayers, not taking a directional stance on privatization outcomes .
• Affordability/DTI: Higher DTIs reflect affordability pressures (home prices + rates); comfort derives from other compensating risk attributes and risk‑based pricing .
• NIW/pricing: Risk/return remains favorable; Q4 NIW included a bit more refi volume following rate moves, but returns consistent with earlier in the year .

Estimates Context

• S&P Global (Capital IQ) consensus for Q4 2024 EPS/revenue could not be retrieved at this time due to a system rate‑limit; therefore, beat/miss analysis versus Street is not included. Values unavailable from S&P Global due to rate limit.

Key Takeaways for Investors

• Expense glide path: underwriting expense ratio improved to 20.8% and 2025 OpEx guide to $195–$205M provides a margin tailwind if achieved .
• Capital returns remain a core pillar: buybacks of 7.8M in Q4 plus 3.5M in January, with $372M remaining authorization and a steady $0.13 quarterly dividend .
• Loss normalization from trough levels: positive loss ratio in Q4 (3.6%) vs negative prior quarters; hurricane impact (~6 bps) and seasonal dynamics are expected; monitor delinquency trajectory into 1H25 .
• Premium yields stable: in‑force premium yield expected to remain relatively flat in 2025, while net premium yield slipped modestly q/q (33.4→32.9 bps) .
• Reinsurance optimized: 40% QSR for 2025–2026 and lower-cost amended 2021 QSR should support capital efficiency and mitigate tail risk under PMIERs .
• Balance sheet/capital strength: PMIERs excess of $2.2B and book value per share up 12% y/y to $20.82 underpin capacity for continued capital return .
• Trading lens: Expect shares to be sensitive to delinquency prints (hurricane runoff and seasonality), cost execution versus the new OpEx range, and continued buyback cadence .