MGIC Investment Corporation (MTG) Q3 2021 Earnings Report, Transcript and Summary

Good day, and thank you for standing by, and welcome to the MGIC Investment Corporation Third Quarter 2021 Earnings Call. t this time, all participants’ line are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Mike Zimmerman. Sir, please go ahead.

Thanks, Mel. Good morning, and thank you for joining us this morning and for your interest in MGIC Investment Corporation. Joining me on the call today to discuss the results for the third quarter of ‘21, are Chief Executive Officer, Tim Mattke; and Chief Financial Officer, Nathan Colson. I want to remind all participants that our earnings release of last evening, which may be accessed on our website, which is located at mtg.mgic.com under Newsroom, includes certain additional information about the company’s quarterly results that we will refer to during the call and includes a reconciliation of the non-GAAP financial measures to the most comparable GAAP measure. We have posted on our website a presentation that contains information pertaining to our primary risk in force, new insurance written, reinsurance transactions, and other information which we think you’ll find valuable as well. I also want to remind listeners that from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website that investors and other interested parties may find valuable. During the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about those factors, including COVID-19, that could cause actual results to differ materially from those discussed in the call are contained in the Form 8-K and Form 10-Q that were filed last night. If the company makes any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. Further, no interested party 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 the Form 8-K or 10-Q. With that, I’d like to introduce Tim Mattke.

Thanks Mike. Good morning, everyone. I’m pleased to report that we generated another quarter of very strong financial results. After my opening remarks, Nathan will provide more detail about our financial results and capital position. Then before we open the line for questions, I’ll wrap-up by discussing the current operating environment, including activities related to housing finance policy. During the quarter, we earned GAAP net income of $158 million. Quarterly financial results continue to reflect the solid credit quality of our increased insurance in force, a strong housing market, a decreasing delinquency rate and improving economic conditions as more local economies return to pre-pandemic levels of activity. As we expected, refinance activity had slowed. However, the purchase market remains strong and accounted for nearly 90% of the $28.7 billion of new business we wrote in the third quarter. This level of new business writings combined with a higher annual persistency, resulted in our insurance in force increasing 2.4% to $268 billion, nearly 12% higher than last year. Reflecting the continued strength of the housing market, purchase applications in our application pipeline, the leading indicator of NIW, continue to account for more than 85% of applications received in recent months. The last 5 quarters’ NIW were the 5 biggest in our company’s 64-year history. So it did not surprise anyone that we do not expect to continue writing such high levels of new business. As we look out over the next several quarters, we expect the refinance activity will remain low, and the purchase activity, while lower than the records of the 5 prior quarters will remain robust as consumer demand for homes remains strong and interest rates, despite rising modestly, are still attracted by historical standards. This environment, combined with increasing annual persistency should allow our insurance in force to continue to grow, although perhaps at a slower annual rate than we have been enjoying in recent quarters. Taking a look at our in-force portfolio, our loss ratio was a low 8.1% in the quarter. This result primarily reflects the current economic conditions, the quality of our existing book of business and a low number of new delinquency notices received. I continue to be encouraged by the quality of new insurance written and the positive trends in credit performance, which continued through October. At quarter end, the excess of our PMIERs available assets over the minimum required assets increased by $300 million to $2.6 billion, and our PMIER sufficiency ratio was 180% at the end of the third quarter. As we discussed last quarter, our capital management strategy centers on maintaining financial flexibility of both the holding company and the writing company to protect our policyholders and to create long-term value for shareholders. This value can be created by writing more primary mortgage insurance, pursuing new business opportunities, retiring debt, paying dividends and/or repurchasing stock. We executed on this strategy during the quarter by writing $28.7 billion of new business and by returning nearly $180 million to shareholders through the repurchase of 10 million shares and paying the increased common stock dividend. In connection with our strategy, maintaining capital flexibility of the holding company means retaining a target level of liquidity well in excess of our near-term needs. At the operating company, it means maintaining diverse sources of capital and a PMIER sufficiency ratio that will enable us to grow even in times of stress and will position us for changes to our operating environment. Of course, these target levels are dynamic and changes with the operating environment changes. We believe that our holding company and writing company capital management strategy will create long-term value for shareholders while allowing us to continue to be well-capitalized counterparty for our customers. In summary, we continually look for ways to maximize near-term business opportunities while remaining focused on long-term success of the company and value for our shareholders. I believe the actions we have taken this quarter in the announcement of the new share purchase authorization that Nathan will discuss demonstrate our commitment to that strategy. We have a strong and dynamic balance sheet. We are confident in our positioning in the market, and we like the risk-reward equation that the current conditions offer. With that, let me turn it over to Nathan.

Thanks, Tim, and good morning. As Tim mentioned, we had another quarter of strong financial results. In the third quarter, we earned $158 million of net income or $0.46 per diluted share and generated an annualized 13% return on beginning shareholders’ equity. Adjusted net operating income was $157 million compared to $150 million in the third quarter last year. During the quarter, total revenues were $296 million, the same as last year. The net premium yield for the third quarter was 38.4 basis points, which was down 7/10 of basis point compared to last quarter. The decrease was primarily results of a decline in the in-force premium yield as the older policies with generally at higher premium rates continue to run off. As refinance activity decreased, we also realized less benefit from accelerated premiums earned from single premium policy cancellations. During the quarter, they were $17 million, which was flat to last quarter but down from $32 million in the third quarter of 2020. Shifting over to credit. Net losses incurred were $21 million in the third quarter compared to $29 million last quarter and $41 million in the third quarter last year. In the quarter, we received approximately 9,900 new delinquency notices, which represents less than 90 basis points of the number of loans insured as of the start of the quarter and drove the low loss ratio of 8.1%. As a point of comparison, in the third quarter of 2019 before the onset of the COVID-19 pandemic, we received approximately 42% more new delinquency notices and they represented approximately 140 basis points of the number of loans insured at the beginning of that quarter, while the loss ratio in the third quarter of 2019 was 12.7%. We are encouraged by the strength of the housing market and the credit trends we are experiencing, including the low level of early payment defaults, I believe they are a good indicator of near-term credit performance. These positive credit trends continued in October, their notice inventory declining by another 1,500 notices as Cures continue to outpace new notices. The estimated claim rate on new notices received in the third quarter of 2021 was approximately 7.5% compared to approximately 8% in the third quarter of 2020. In the quarter, we realized $18 million of favorable loss reserve development compared to immaterial development last quarter and in the third quarter of last year. The favorable development in the quarter was primarily attributable to delinquency notices received prior to the start of the COVID-19 pandemic. At this point, we still have not seen adequate support to make any adjustments to the reserves associated with the large cohort of COVID-related delinquency notices received primarily in Q2 of last year, but we remain encouraged as we saw a similar level of notices in Cures in October as we did in September. The number of claims received in the quarter remained very low due to the various foreclosure and eviction moratoriums. Primary paid claims in the quarter were $18 million compared to $11 million last quarter. The modest increase in paid claims this quarter was primarily the result of a commutation of coverage on nonperforming loans in the third quarter. We continue to expect claim payments to remain low for the next few quarters given the timelines for foreclosure and eviction moratoriums for GSE loans and the additional procedural safeguards required by the CFPB. Next, I wanted to spend a couple of minutes talking about our capital position and capital actions in the quarter. As Tim mentioned, in the third quarter, we paid an $0.08 per share dividend for a total of $27 million and repurchased 10 million shares for a total of $150 million. In October, we repurchased an additional 3.8 million shares for a total of $60 million under a 10b5-1 plan, we put in place earlier this year. The Board also authorized an additional $500 million share repurchase program that expires at the end of 2023. And as previously announced, the Board declared an $0.08 per share dividend payable on November 23. At the end of the third quarter, we had $716 million of holding company liquidity and a $2.6 billion access to the PMIERs minimum requirements at the operating company. MGIC’s access to the PMIERs requirements as of September 30 resulted in a PMIERs sufficiency ratio of 180% and remained above our current target level. Since MGIC’s capital position continues to be above our current target level, we are having discussions with our regulator about a dividend to be paid in the fourth quarter of 2021. As of October 30 -- as of October 31, 2021, our holding company’s liquidity also remains above our current target levels even if we fully use the remaining $81 million on the share repurchase authorization that expires at year-end 2021. Any additional dividends paid from MGIC to the holding company in the fourth quarter would increase the holding company’s liquidity. At this time, our plan is to use those additional dividends if they are received to settle the eventual redemption of our 9% Convertible Junior Debentures due in 2063. Our most recent 10-K has additional details, but under the terms of the debentures, we can redeem the debentures for principal plus accrued interest when our share price closes above a certain level for 20 of 30 consecutive trading days. For 2021, that share price level is $17.20. And the share price level has reduced annually as a result of the dividends paid in the prior year and under certain circumstances as allowed under the debentures. We hope to provide a redemption notice for the debentures in the near term with the redemption date at least 30 days later. If we provide a redemption notice, we expect virtually all of the holders of the debentures will elect to convert their debentures into common stock before the redemption date. Under the terms of the debentures, we may elect to pay cash to converting holders in lieu of issuing shares, and we expect we would do so under most circumstances. Given our strong operating results and recent share price performance, we felt it was the right time to position the holding company to actively consider the retirement of the debentures. While the timing remains uncertain, retiring the debentures would eliminate approximately 16 million potentially dilutive shares and $19 million in annual interest expense. And would reduce our debt-to-capital ratio by approximately 300 basis points as of September 30 on a pro forma basis. As Tim mentioned, we continue to believe that our balanced approach to maintaining a strong capital position provides the most flexibility to maximize the long-term value of both the writing company and the holding company. This balanced approach includes using forward commitment quota share reinsurance treaties, accessing the capital markets for excess of loss reinsurance via ILN transactions and seeking dividends from MGIC to the holding company as appropriate. While not an indication of the amount of dividends we would see, our current expectation is that any future dividends paid from MGIC to the holding company will occur less frequently than the quarterly cadence we had pre-COVID due in part to the robust liquidity position of the holding company. With that, let me turn it back to Tim.

Thanks, Nathan. Before moving to questions, let me address a few additional topics. The federal government through its various agencies, including FHFA and CFPB continues to focus its housing policy efforts on providing access to sustainable and affordable housing, promoting for closure and eviction mitigation for homeowners impacted by COVID-19 and ensuring a successful economic recovery and not on making large-scale changes to the housing finance infrastructure. We will continue to advocate for the increased use of private mortgage insurance in the housing finance industry in order to reduce taxpayer exposure to housing while still maintaining a resilient housing finance system. At MGIC, we are focused on providing critical support to the housing market, especially low and moderate income and first-time home buyers. Long term, I remain encouraged about the future role that our company and industry can play in housing finance and believe that other regulators and policymakers share a similar view because our company and industry organized solely to provide credit enhancement solutions to lenders, borrowers and the GSEs in all economic cycles. Not only does private mortgage insurance offer dedicated capital day in and day out to the housing industry, it offers many solutions and a great value proposition for lenders and consumers to overcome the #1 barrier to homeownership - the down payment. In closing, let me recap by saying that we are currently writing high levels of quality new insurance and are experiencing low levels of delinquencies, both newly reported and those already are in our delinquency inventory. The housing market remains strong, and we have a book of business that has solid underwriting credit characteristics, which is supported by a strong and dynamic balance sheet with a low debt-to-capital ratio, an investment portfolio of nearly $7 billion, contractual premium flow and a robust reinsurance program. I’m confident in our positioning in this market, and we like the business opportunities that the current operating environment presents. We have the right team in place to build on our solid foundation to continue to deliver competitive offerings and best-in-class service to our customers and generate strong returns for our shareholders. With that, operator, let’s take questions.

[Operator Instructions] We have the first question comes from the line of Bose George.

Okay, first, just on the capital return -- subject capital return, do you have a target debt-to-capital range we should think about as we sort of think about the cadence of capital return?

Bose, this is Nathan. I’ll take that one, and thanks for the question. I think what we’ve said last quarter and still feel the same way, is that right now, we’re in the low 20s, 20% to 21% debt-to-capital. I would certainly feel comfortable if that came down a little bit, but also comfortable with where we are. So don’t feel like we need to take near-term actions but also don’t feel like if some of the smaller debt issues that we do have outstanding like the 9%s, if we are able to resolve those, wouldn’t feel like we need to necessarily issue new debt in order to replace that either.

Okay, great. That’s helpful. And then actually, when you redeem the -- in 2063, is there any book value impact we should think about?

The only thing that I would think about is under the terms of the debentures, our redemption notice is really when the underlying stock is worth about 130% of par value; on the balance sheet, they’re on our balance sheet at par value. So to settle them there will be a -- assuming that we pay cash versus issue the shares, there would be a book value impact presumably for the delta between the value of the underlying shares and the par value that we have. But again, that’s kind of dependent on what happens to the share price in the future and post our redemption notice. So it is hard to fully pin down, but I do think there will be a book value impact there.

We had the next question comes from the line of Cullen Johnson.

Just wondering if you could expand a little on the favorable development in the pre-COVID population, what factors might be driving development there, you think?

Yes. This is Nathan again. I think similar to what we’ve been talking about, it’s really for us, every quarter doing a similar evaluation and really asking ourselves, do we have enough new evidence to change our initial estimates? And I think out of that pre-COVID cohort, there weren’t nearly as many forbearance items in there as the kind of peak COVID-related notices. They’ve had longer time to work their way through. And I think it got to the point where the actual cure activity to date just made it such that it felt like our initial estimates were a little too high and ultimately took that $18 million in favorable development this quarter.

Got it. That makes sense. And then just kind of looking at required assets under PMIER. They’ve remained relatively constant in the last few quarters, despite that maybe as delinquent loans age, they tend to carry some higher capital requirements with them. So would it be fair to think of that dynamic maybe being counteracted, so to speak, by just the pace of cures of delinquent loans you’ve seen that have just outpaced new notices?

Yes. I think specific to the required assets on delinquent loans, I think you’re right to call out those 2 dynamics. The last aging bucket in PMIERs 2.0 I believe, is 12 months plus. So a lot of the loans they’re in their kind of final aging bucket at this point, but we continue to see good Cure activity and the notice inventory continuing to decline. So when there’s less delinquent risk, obviously less required capital for that risk.

We have the next question comes from the line of Mark DeVries.

I had a follow-up question about the redemption of the debentures. Nathan, did you indicate that the stock needs to be trading somewhere above $17 for a couple of weeks before you can redeem?

Yes, Mark, this is Nathan. That’s right. For 2021, the key share price level for the debentures is $17.20. Because of the dividends that we paid in calendar ‘21, including the fourth quarter dividend that we will pay, that level will come down for calendar ‘22 to, we think, around $17 even. So, that’s the level that we need the share price to be at for 20 of 30 consecutive trading days in order to redeem the debentures.

Okay. And then in terms of thinking about the impact, would you then assume -- I mean you said you expect everyone to convert to common, would you then take the amount of cash that it would have taken to buy back the bonds if they didn’t convert to buyback than effectively stock?

So as I mentioned in the prepared remarks, under the terms of these debentures, we’re actually able to settle in cash or shares if holders convert. So even if they elect to convert, we have the option to settle in cash. There’s a set formula in the document that describes how that works. But we think under most circumstances, we would pay the cash versus issue the shares and then repurchase them.

Got it. Got it. That’s helpful. And separate question, Tim. Some of your and my peers have been investing or exploring investments in related non-MI businesses. It’s been a long time since the [indiscernible] days. But as you sit here today with considerable excess capital, could you just discuss your views of diversifying the business through M&A as a strategy for enhancing shareholder value?

Yes, Mark. No, I appreciate the question. It has been a long time since [indiscernible] days, but I do remember those. It’s something -- and as I mentioned in the prepared remarks, when we think about how we deploy capital, we start with being able to write high-quality business like we do. We do consider what other investment opportunities might be, and you can think about that from a diversification standpoint. But if we don’t see anything that we think really creates the value for the enterprise and for the shareholders, then we sort of move down the stack and look towards capital return as being the best use of any excess capital that we have. And so that’s been the way we’ve been looking at it. We always are looking quite frankly, to see if there’s anything out there that we think that would be accretive over time, but we haven’t seen it over the last decade, quite frankly. That’s not to say we wouldn’t, because again, it’s a good thing to have excess capital to think about those things. But there’s been nothing that has caught our attention that leads us to think that we would change sort of current practice.

Next question comes from the line of Doug Harter.

Just hoping you could talk a little bit about your expectations for what a normal level of new notices is in this kind of current environment and how home price appreciation impacts that?

Doug, it’s Nathan. I think for us, the level of new notices, if you think about it in terms of -- we described it in terms of basis points on account basis points of the number of loans that are in force. That’s been trending down for us for some time, largely driven by the continued runoff of the legacy book. When we see new notice delinquency rates on the more recent vintages, they are lower. So we’ve experienced really low in the last 6 months, really low new delinquency notice rates. But I think the -- a lot of those are still from the legacy book. So as those continue to burn off, there might be some tailwind there. I think the headwind that we’re likely to see over the next couple of years is just that we have these really large books of business from ‘19 and ‘20 and early ‘21, that will be entering the years where they typically throw off the most new delinquency notices. So the net of those things are, I think it’s really hard to judge out much beyond what’s happening in the near term here. Yes. And the one thing I’d add to, Doug, is when I think about the home price appreciation that’s happening is it might help avoid some delinquencies, but I think about it more in terms of being able to turn more delinquencies into either lower severity claims or into no claims at all into cures because of it being a potential resolution of the delinquency.

Next question, we have from the line of Mihir Bhatia.

Just a couple of quick ones for me. First, I just wanted to follow up on Mark’s question around M&A. I guess Mark was asked a little bit outside of M&A with like some of your peers, but maybe I’ll ask just about the industry itself. Do they need to be fixed mortgage insurance companies? And what are your thoughts around potential for industry consolidation here? I mean I ask because everyone seems to have excess capital, credit is reasonably good, but valuations are basically book value. So just wondering what your thoughts are on that.

No, it’s a fair question. One, I would expect that we have gotten and we’re going to continue to get as an industry, the way we look at it, I think the way I just look at it is as sort of math equation. Anybody looking to sell is looking to get paid for their book value and effectively their market share and future sort of market share on that. You have to make sure that the loss in that sort of share you can counteract that with expense savings. The math from when we’ve looked at this has not worked. I think it’s something probably everybody in the industry looks at somewhat regularly. And so whether we need fix, that’s a good question. We’ve had a lot of volume in the last few years. That’s made it easier. We’ve indicated that we think volume is going to be slightly lower next year, but we do think we’re going to be able to continue to grow insurance in force. So it’s something that’s, I think, a question that we’re going to continue to get asked, we’re going to continue to look at. But the math has to work from the loss of potential share of the 2 combined entities compared to the expense savings that you can have.

Okay. No, that makes sense. And then just -- maybe just starting on the regulatory front. Just very quickly, I was curious. Could you see any impact from recent developments by the states? I think like New York, for example, has been talking about requiring nonbanks to comply with the CRA. Now I know that wouldn’t directly impact you, but could you have a knock-on impact from that?

Yes. I mean, again, it’s a valid question, and the message just came out this week. I think from a knock-on effect, obviously, we’re regulated by the states currently. And so some states are more active than others. So I think it’s something that we have a team that pays close attention to that. I don’t foresee any knock-on effect from that per se. I think it could lead to some more discussions with some of our customers as to how they participate in that space and how we could help. But that is not a huge portion of our business at this point. But we’re well suited to be able to have those conversations with those customers as they want to engage on it, and we are normally proactive with those customers. And so can create opportunity from a regulatory standpoint. Again, we try to stay abreast of what’s happening out there. I don’t see a specific knock-on effect though here that I am concerned about.

Okay. No, that’s helpful. And then my last question. Just and really kind of a big one in terms of just the premium rate, right? For the industry as a whole, we understand -- I think people understand the dynamics of why it’s declining. The bigger question, I think, is where does the in-force portfolio yield stabilize? You used to give that disclosure on NIW premium yields. I don’t know if you’d be willing to share your current quarter NIW yield or just any thoughts you have on where portfolio yields will stabilize?

Yes. I think when we look at portfolio yields, we talked the last few quarters about what the trend line is, sort of a basis point a quarter. And I think we would expect that as we move towards the end of this year as well. We look at it from a forecasting standpoint. The reality is there’s market dynamics that can impact that as well as sort of -- I’d say that from a pricing market dynamic standpoint on new business, but also from a mix standpoint, as we transition to more purchase volume, traditionally, that’s going to come with a little bit higher LTV, a little bit higher premium. And so that mix can impact sort of how the premium sort of moves, which is why I think we’re always a little bit, I guess, reluctant to sort of go too far out on what might happen there. But it’s -- again, it’s a valid question. It’s something that we look at, and we think about. But then to us, also the key focus is the returns that we’re able to get off of the business. And from a capital deployed, we still feel extremely comfortable with the risk-return equation that we’re able to get, and I think others are able to get in the industry right now.

Mihir, this is Mike. Maybe just to add on to that. I mean why it is difficult is because we’re looking to predict prepayments, for everybody wants to have prepayments of like the 2019 book and prior. If you look at the last 2 years, ‘20 and ‘21, it’s about 65% of our current in-force. So 35% from ‘19 to prior, which is higher premium rates before the more granular pricing and the risk base and all those things have taken place. Think the quarter, if I go back last quarter, it was like 40%. So that gets to be part of the struggle, right, in trying to forecast where things are at. It’s not only new business coming in, but it’s also the pace of prepays of the old book, and it’s a long-tail business. So that’s what makes it more complicated to try and give more specific guidance to.

Next question comes from the line of Ryan Gilbert.

Unfortunately, I jumped on the call late. So I apologize if you’ve already answered this. But is there any impact or benefit to your premium yield going forward from the QSR terminations?

Ryan, it’s Nathan. There will be a modest benefit. One of the reasons why we elected to terminate those deals is that the prepayments out of those books had been so significant that they’re just relatively small deals at this point. And those are some of our older single vintage quota share deals. We had less optionality relative to reducing the quota share terminating. So felt like I think in one case, it was our only option. So I do think directionally, there’s a positive there, but I think it’s going to be very modest. And again, that will still show up in the Q4 numbers, including the termination fee that we pay across those 2 deals, which is $5 million combined. So the kind of favorable effect of not ceding premium under those deals won’t really be until the first quarter of ‘22. But like I said, they’ve really run down quite a bit. So there’s not a lot of volume in those, from a premium standpoint or from, say, a PMIERs benefit standpoint at this point.

Okay. Got it. Second question on NIW. It looks like the 90-plus LTV NIW has been ticking up as a percentage of total over the course of 2021. Is that just a function of home price appreciation and the characteristics of total origination volume? Or is that more an MTG strategy to, I guess, capture the best returns on NIW in the market?

I would say that the movement there has been as much about the market and the sort of the move from a bigger portion of NIW being from refi to be more purchase driven. And so just with the lack of refis on average higher LTVs in that population. But I’d say that would be the biggest driver.

Okay, great. The last one for me is on, I guess, the relationship between premium yield and insurance in force. And if I look at 3Q relative to 2Q, you’ve been able to offset lower premium yield with higher insurance in force. Do you think that’s a dynamic that can continue in 4Q and in 2022? Or should we be thinking about not getting enough persistency to offset premium yield compression ahead?

It’s Nathan. I’ll take that one. I think we’ve talked about directionally, we think that we can continue to grow the insurance in force, although it may be at a more modest pace than we’ve had in recent quarters, where I think we’re right now this quarter at 12% year-over-year growth. So the -- if we’re growing insurance in force, then the question is we do expect that the in-force yield will continue to decline, which one is happening at a faster pace. And I think that’s hard to judge, but those are certainly offsetting factors. Even if the premium yield does come down, we think that will be mitigated by in-force growth over the next couple of quarters. And then like we said, as you get out beyond the next couple of quarters, it’s just the function of so many things that are really market-driven and frankly, it got to happen. So it’s really hard to predict.

[Operator Instructions] Next question comes from the line of Geoffrey Dunn.

First, just a technical question. Nathan, where is the $5 million termination fee going to be booked? Is that going to run through premium or the expense line?

Geoff, it’s Nathan. It will be on the premium line.

Okay. And then as you think about your 2063, are you suspending your open market buyback activity or changing the parameters of your 10b5-1 in anticipation of that? Or are you continuing with the same parameters you had for your Q3 buyback?

I think the way that we’ve thought about that is once we’ve provided the redemption notice that, that is kind of a period where we could potentially be issuing stock, it wouldn’t be appropriate for us to be repurchasing shares, at least from our perspective at that time. But until the time that we provide the redemption notice, which again is after that kind of 20 or 30 trading days, it’s not really impacting kind of how we’re thinking about share repurchase execution in the near term.

Okay. And then last thing, I wanted to follow up on the question about M&A. And I’m curious if -- as you think about diversification, do you weigh the economic value against the possible challenges of actually realizing that value with diversification kind of getting stuck in an MI multiple? Does that come into play as you consider diversification versus excess capital return to shareholders?

Jeff, I guess, I’d say it comes into play in that when we look through the lens, it has to make sense as far as how it, I think, aligns with our business. And I do think it ultimately has to translate into value to our shareholders, too. And so I don’t know if those are always mutually exclusive necessarily. But it is a thought process in that. It has to be meaningful, in my opinion, for it to really be diversification, right? It can’t be something that’s small and that does not translate into value in the eyes of shareholders. Now my hope would be that everything that we do creates value and then ultimately, the shareholders view it that way. But that’s an important sort of piece of the connection in my mind is that you need to ultimately create that value for the shareholders, and that’s done through operating the business. With where we are right now, we feel very confident we’re able to do that and that we’re also able to create value in returning the excess capital. Yes, I think it’s a factor when we think about diversification of can that create value ultimately for the business, for the shareholders.

We don’t have any questions to queue as of the moment. Please continue, presenters.

Okay. Well, I want to thank everybody for their interest in MGIC and hope everyone has a safe and healthy holiday season as we move into the last part of the year. Thanks, everyone.

Thank you. Ladies and gentlemen, that concludes today’s conference call. Thank you all for participating. You may now disconnect.