MGIC Investment Corporation (MTG) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation second quarter 26 earnings call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you will need to press 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. I will now turn the conference over to Dianna L. Higgins, Head of Investor Relations. Please go ahead.

Thank you, Ari. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the second quarter are Timothy Mattke, Chief Executive Officer and Nathaniel Howe Colson, Chief Financial Officer. Our press release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under newsroom. It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non GAAP financial measures to their most comparable GAAP measures. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk in force, and other information you may find valuable. As a reminder, from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before getting started today, I want to remind everyone that 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. Our 8-Ks and 10-Q filed yesterday, includes additional information about the factors that could cause actual results to differ materially from those discussed on the call today. If we make any forward looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. No 1 should rely on the fact that such guidance or forward looking statements are current any time other than the time of this call or the issuance of our 8-Ks or 10-Q. With that, I now have the pleasure to turn the call over to Timothy.

Thanks, Dianna. Good morning, everyone. Our deep industry expertise strong balance sheet, and unwavering focus on our customers continue to drive long term value creation. Our results reflect the strength of our business model, and our disciplined execution across the business. In the second quarter, we generated net income of $182 million delivering an annualized return on equity of 14.5%. Our consistent execution combined with the strength of our balance sheet drove book value per share to $24.27. An increase of 10% year-over-year. While we also paid 60¢ per share in dividends in the last 12 months. We wrote $18 billion of new insurance in the second quarter. An increase of 8.5% from the second quarter of 2025 and our highest NIW since the third quarter of 2022. We expect the increase was due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market. Insurance in force ended the quarter at $305 billion up slightly in the quarter and up 2.6% from a year ago. At the end of the second quarter, annual persistency was 83%, down slightly from 84% last quarter. Both insurance in force and annual persistency were in line with the expectations we previously shared. Continue to see solid performance across our well balanced portfolio, supported by strong credit quality, and disciplined underwriting practices. Early payment defaults continue to track at low levels, reinforcing our confidence in near term credit expectations. Our capital structure remains robust, with $6 billion of balance sheet capital and a well established reinsurance program that continues to be a core component of our risk and capital management strategy. loss volatility and stress scenarios Reinsurance agreements with a panel of highly rated reinsurers reduce loss volatility in stress scenarios while providing capital diversification and flexibility at attractive costs. During the second quarter, we further enhanced our reinsurance program by executing a traditional excess of loss reinsurance transaction that provides up to $168 million of protection on eligible NIW in 2027. At the end of the second quarter, our reinsurance program reduced our PMIERs required assets by $3.1 billion or approximately 52%.

With that, let me turn it over to Nathaniel to provide more details on our financial results and capital management activities for the quarter. Thanks, Timothy, and good morning. As Tim discussed, we had solid financial results for the second quarter. We earned net income of $0.86 per diluted share compared to $0.81 per diluted share last year. Our re estimation of ultimate losses on prior delinquencies resulted in $43 million of favorable loss reserve development in the quarter. This favorable development primarily reflects better than expected cure activity on delinquency notices received in 2025. As a reminder, delinquency notices in any quarter span multiple book year vintages. For new delinquency notices received in the second quarter, we continue to apply our initial claim rate assumption of 7.5%. In the quarter, our count based delinquency rate decreased 7 basis points, which we expect was driven by seasonal trends. Compared to a year ago, the delinquency rate increased 16 basis points to 2.37%. We expect seasonality to lead to an increase in delinquencies in the second half of the year, the delinquency trends through the second quarter remain consistent with the credit normalization we have been experiencing for the past 3 years and the delinquency rate remains 43 basis points below the second quarter of 2019. The in force premium yield was 38 basis points in the quarter down a little less than 1 basis point in the past 3 years. With high persistency expected in 2026, and MI origination trend similar to last year, we expect the in force premium yield to continue on a similar path to the past couple of years. Investment income totaled $59 million in the second quarter. The book yield on our investment portfolio remains approximately 4%. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield but our capital return activities have limited the growth in the investment portfolio and the resulting investment income. Underwriting and other expenses in the quarter were $46 million down from $52 million in the second quarter of last year as we remain focused on disciplined expense management. We now expect operating expenses for the full year to be toward the low end of the $190 million to $200 million range we previously shared. Our approach to capital management remains unchanged. We prioritize prudent insurance in force growth over capital return. Market conditions have constrained insurance in force growth in recent years. And against that backdrop, our capital return activity reflects continued strong mortgage credit performance and our robust financial position. In the second quarter, we paid a common stock dividend of 15¢ per share. We also repurchased 6.6 million shares of stock for $177 million Over the prior 4 quarters, share repurchases totaled $746 million and shareholder dividends totaled $135 million Combined, they represented a 124% payout of the net income earned over the period. The strong financial position of both the holding company and the operating company was a key factor in the board's decision last week to approve an increase to our quarterly common stock dividend to $0.17 per share. This marks 6 consecutive years of dividend increases representing a compound annual growth rate of 19% over that period.

With that, let me turn it back over to you. Thanks, Nathaniel. Last month, I assumed the role of chairman of USMI, our industry's trade association. Through decades of economic cycles, mortgage insurance has consistently demonstrated its value to homeowners, lenders, and the broader housing finance system. Mortgage insurance is at the center of several important policy discussions, and we are committed to ensuring those conversations are informed by data, experience, and a proven track record. I look forward to working with our great team at USMI and being able to represent the industry in those conversations. Turning back to MGIC, our second quarter results demonstrate the benefits of disciplined execution, and the strategy we have thoughtfully refined over time. This long term approach has supported our competitive position driven strong business performance, and generated meaningful returns for shareholders. Combined with our continued commitment to our customers, we believe we are well positioned to capitalize on opportunities, manage through evolving market conditions and deliver long term value. With that, Ari, let's take questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone, and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Hey, thank you. Good morning. Just want to get your latest thoughts on credit.

I think Nathaniel, last quarter, you called out Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation Second Quarter 26 Earnings Call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you will need to press 1-1 on your telephone. Will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. I will now turn the conference over to Dianna L. Higgins, Head of Investor Relations. Please go ahead.

Thank you, Ari. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the second quarter are Timothy Mattke, Chief Executive Officer and Nathaniel Howe Colson, Chief Financial Officer. Our press release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under newsroom. It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non GAAP financial measures to their most comparable GAAP measures. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk in force, and other information you may find valuable. As a reminder, from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before getting started today, I want to remind everyone that 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. Our 8-Ks and 10-Q filed yesterday includes additional information about the factors that could cause actual results to differ materially from those discussed on the call today. If we make any forward looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. No 1 should rely on the fact that such guidance or forward looking statements are current any time other than the time of this call or the issuance of our 8-Ks or 10 Q. With that, I now have the pleasure to turn the call over to Timothy.

Thanks, Dianna. And good morning, everyone. Our deep industry expertise strong balance sheet, and unwavering focus on our customers continue to drive long term value creation. Our results reflect the strength of our business model, and our disciplined execution across the business. In the second quarter, we generated net income of $182 million delivering an annualized return on equity of 14.5%. Our consistent execution combined with the strength of our balance sheet drove book value per share to $24.27 an increase of 10% year-over-year. While we also paid 60¢ per share in dividends in the last 12 months. We wrote $18 billion of new insurance in the second quarter. An increase of 8.5% from the second quarter of 2025 and our highest NIW since the third quarter of 2022. We expect the increase is due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market. Insurance in force ended the quarter at $305 billion up slightly in the quarter and up 2.6% from a year ago. At the end of the second quarter, annual persistency was 83%, down slightly from 84% last quarter. Both insurance in force and annual persistency were in line with the expectations we previously shared. Continue to see solid performance across our well balanced portfolio, supported by strong credit quality, and disciplined underwriting practices. Early payment defaults continue to track at low levels, reinforcing our confidence in near term credit expectations. Our capital structure remains robust, with $6 billion of balance sheet capital and a well established reinsurance program that continues to be a core component of our risk and capital management strategy. Reinsurance agreements with a panel of highly rated reinsurers reduce loss volatility and stress scenarios while providing capital diversification and flexibility at attractive costs. During the second quarter, we further enhanced our reinsurance program by executing a traditional excess of loss reinsurance transaction that provides up to $168 million of protection on eligible NIW in 2027. At the end of the second quarter, our reinsurance program reduced our PMIERs required assets by $3.1 billion or approximately 52%.

With that, let me turn it over to Nathaniel to provide more details on our financial results and capital management activities for the quarter. Thanks, Timothy, and good morning. As Tim discussed, we had solid financial results for the second quarter. We earned net income of $0.86 per diluted share compared to $0.81 per diluted share last year. Our re estimation of ultimate losses on prior $43 million of favorable loss reserve development in the quarter. This favorable development primarily reflects better than expected cure activity on delinquency notices received in 2025. As a reminder, delinquency notices in any quarter span multiple book year vintages. For new delinquency notices received in the second quarter, we continue to apply our claim rate assumption of 7.5% In the quarter, our count based delinquency rate decreased 7 basis points. Which we expect was driven by seasonal trends. Compared to a year ago, the delinquency rate increased 16 basis points to 2.37%. While we expect seasonality to lead to an increase in delinquencies in the second half of the year, the delinquency trends through the second quarter remain consistent with the credit normalization we have been experiencing for the past 3 years and the delinquency rate remains 43 basis points below the second quarter of 2019. The in force premium yield was 38 basis points in the quarter down a little less than 1 basis point in the past 3 years. With high persistency expected in 2026, and MI origination trend similar to last year, we expect the in force premium yield to continue on a similar path to the past couple of years. Investment income totaled $59 million in the second quarter. The book yield on our investment portfolio remains approximately 4%. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield but our capital return activities have limited the growth in the investment portfolio and the resulting investment income. Underwriting and other expenses in the quarter were $46 million down from $52 million in the second quarter last as we remain focused on disciplined expense management We now expect operating expenses for the full year to be toward the low end of the 190 million to $200 million range we previously shared. Our approach to capital management remains unchanged. We prioritize prudent insurance in force growth over capital return. Market conditions have constrained insurance in force growth in recent years, and against that backdrop, our capital return activity reflects continued strong mortgage credit performance and our robust financial position. In the second quarter, we paid a common stock dividend of 15¢ per share. Also repurchased 6.6 million shares of stock for $177 million Over the prior 4 quarters share repurchases totaled $746 million and shareholder dividends totaled $135 million Combined, they represented a 124% payout of the net income earned over the period. The strong financial position of both the holding company and the operating company was a key factor in the board's decision last week to approve an increase to our quarterly common stock dividend to $0.17 per share. This marks 6 consecutive years of dividend increases representing a compound annual growth rate of 19% over that period.

With that, let me turn it back over to you. Thanks, Nathaniel. Last month, I assumed the role of chairman of USMI, our industry's trade association. Through decades of economic cycles, mortgage insurance has consistently demonstrated its value to homeowners, lenders, and the broader housing finance system. Mortgage insurance is at the center of several important policy discussions We are committed to ensuring those conversations are informed by data, experience, and a proven track record. I look forward to working with our great team at USMI and being able to represent the industry in those conversations. Turning back to MGIC, our second quarter results demonstrate the benefits of disciplined execution, and the strategy we have thoughtfully refined over time. This long term approach has supported our competitive position driven strong business performance, and generated meaningful returns for shareholders. Combined with our continued commitment to our customers, we believe we are well positioned to capitalize on opportunities, manage through evolving market conditions and deliver long term value. With that, Ari, let's take questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone, and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Hey, thank you. Good morning. Just want to get your latest thoughts on credit. I think Nathaniel, last quarter, you called out a 10- to 15-basis-point year over year increase in the delinquency rate as consistent with credit normalization. We are certainly in that ballpark the last 2 quarters. So is there any color you can kind of provide on new notices by region or vintage that can maybe just inform our view of credit going forward?

Yeah, Terry, it is Nathaniel. Thanks for the question. You know, it is something that we look at closely, not just quarterly, but really on a monthly basis. What is the mix of new delinquencies? What are we seeing in maybe early payment default trends? What are we seeing across certainly any of the single dimension variables but even multiple dimensions. As we look at it, other than the continuous roll forward to more recent vintages, which is what you would expect, When we look at it across other key credit variables, we really do not see a lot of difference in the mix, and we are not seeing it geographically. We are not seeing it really correlated to, say, home price changes in various states. So, again, something that makes us feel confident that we are looking at a broad based credit normalization versus real deterioration in any segment or anything that is going to lead to changes that we feel like we need to make?

Got it. And when we think about the cure rate, all the post COVID vintages, you know, about 90% of new notices cure within 4 quarters. I think, Timothy, when I had you on stage in my conference a few years ago, you gave a number pre-pandemic that was, you know, lower than 90%. I am just wondering, as we track all the data, like, everything's kind of tracking toward that 90% mark. Do you expect normalization going forward lower than 90% at any given point? Just trying to think about that.

Terry, it is Nathaniel. I would maybe think about it, less at a particular point in time. In terms of maybe 12 months after delinquency. What we are really focused on is what is the ultimate claim rate going to be on a group of new notices. So when we set our initial expectations at 7.5%, that is looking on a fully developed basis what percent of those new notices are ultimately going to result in a claim And the consistent favorable development that we have had as a result of actual claim rates being quite a bit lower than that 7.5% that we were putting up initially. I will say, and we have talked about this over the last couple of calls too, you know, we are coming off the lowest point for us for the new notice claim rate was the second quarter of 2020, the peak COVID quarter, which ultimate claim rates are less than 1%. Out of that group. So we are, we are certainly not running at that level anymore. But today it looks like fully developed notice quarters maybe from say 2 or 3 years ago are more in that 2% to 3% range. And more recent, maybe trending slightly higher than that. So fully developed notice quarters today, we might be thinking, you know, 3% to 4% ultimate claim rate. Still quite a bit lower than what we are expecting on new notices. I think that is because the conditions have played out quite favorably over the last 2 or 3 years, although there is been a lot of uncertainty at every point along the way. Think we still feel quite comfortable with our initial new notice expectations. But if credit conditions remain what they are today, we likely will have additional reserve redundancy that will be released through favorable development in the future.

Got it. Thank you.

Thank you. Our next question comes from the line of Bose George of KBW. Your line is now open.

Hey, guys. Good morning. Just first, wanted to just ask about competitive trends in the market, anything to call out there?

And then, I mean, your gross premium yield, it looks like it ticked down a tiny bit. Is that just noise? Yeah, Bose. I mean, from competitive dynamics, again, it is a competitive market. Marketplace, right, with 6 active participants. I would not say anything stands on this quarter. As you said, the when we look at the gross premium rate, which is what we really focus on, it did grind down a little bit more this quarter. And that is sort of been the trend over the last couple of years, quite frankly. So not any major changes quarter to quarter, but the trend has been slightly downward. Not unexpected from our standpoint. So, again, nothing that has changed in the competitive marketplace that is caused that, but it has been the general form of direction, but not anything that is sort of steepening or anything in that regard.

Okay. Great. Thanks. And then issue on reinsurance? So you guys did the transaction Just can you compare the execution in the, you know, traditional reinsurance versus the ILN market? Is the benefit here more Structural, or is the pricing better here? Or just yeah. Can you just contrast the 2?

Yep, Bose, it is Nathaniel. I think the biggest thing, the XOL that we just did is really covering 2027 NIW. Whereas the ILN market is all on a kind of a warehouse, already in-force loans. So we have to spend time to build a pool, I think there is also a lot of fixed costs associated with doing those deals and size requirements that are expected in the market. Whereas you can do smaller reinsurance deals. So our intention is to be programmatic in both the excess of loss and ILN markets, but the ILN deals are individually a little bit larger. And since we have to warehouse the risk, you know, just happen at a at a slightly less frequent cadence, but we have done deals pretty consistently. We have had you know, fill up periods as short as 5 months in the ILN market and as long as maybe 2 years, just depending on volume. So it is a market that we want to continue to operate in. But I do not view the excess of loss deal that we did covering our 2027 NIW as indicative of, we are not interested in the ILN market. They are just different executions in different parts of our program.

Okay. Great. Thanks.

Thank you. Our next question comes from the line of Mihir Bhatia of Bank of America. Your line is now open.

Good morning. Thank you for taking my question. I just wanted to maybe first just start big picture, just given the Tim you talked a little bit about credit conditions. Just given, you know, great move in rate, housing, your view on, like, the housing fundamentals, maybe talk about industry NIW. This year. And related to that, just wanted to understand the underwriting posture. Are you tightening, loosening, anywhere on the margin? Just your thoughts around that. Thank you.

Yeah. No, Mihir, I appreciate the question. I mean, I think as far as the market goes, the size has been fairly consistent with what we have expected coming into the year. Right? Like, there is modest home price appreciation out there in certain parts. Purchase, again, it was our second largest it was our largest NIW since, you know, 2022. And up from where we were a year ago? So, again, you continue to see positive signs in the purchase market. Refi market, obviously, is going to be really stunted by where rates are right now and so, again, I do not think we bank on that changing. But, again, for us, that is normally churn in the portfolio as opposed to anything that really helps us grow in force. Affordability is definitely continues to be stretched, again, with where interest rates are and where home prices are. I think it makes it difficult to see a large change in sort of people coming to be buyers in this market. I think you can see there probably there is some thawing and, sort of lock in effect as far as people willing to sell their homes that have good interest rates. But, again, as interest rates remain high, generally, that makes it tougher to see that really, you know, sort of break loose in a meaningful way. So I am a general believer that sort of the market we have felt for this quarter and feels like we have been in for the last year for the most part of the little mini refi ways? Sort of what we are in for the foreseeable future. So that does not create a lot of growth for us. But as Nathaniel said, you know, we would love to grow the in force portfolio. But, really, we wanna do that if the overall sort of sort of pie is growing. And if it is not growing, like, we are we are content to return that capital to shareholders if we think that is the right answer.

And then just from a credit perspective, is there any loosening or tightening going on at the margin Maybe any thoughts around the softer home price backdrop could flow through? Or to do?

Yep, Mihir, it is Nathaniel. I mean, I would say from a from an actual underwriting guideline perspective, there really has not been meaningful changes in quite some time from our guidelines. And the mix of business has been quite consistent as well. I think if anything, over the last 2 years, there is been a slight decrease in the amount of above 45 DTI business that is been done, but that is maybe the most notable change that I would see. That was not necessarily a result of you know, guideline changes by us. I think just what was what was getting done in the market changed a little bit. So I think we are quite comfortable with the mix that we are getting and the risk adjusted returns really across the spectrum. So I do not feel a need to make any meaningful underwriting changes right now given expected performance or actual performance today?

Alright. And then just my last question, just around buyback. Obviously, you have a new authorization in play. Could we view that as a signal of an acceleration, or is it more just continuing the current steady state because you have been returning a fair amount of capital already?

So, yep. Yeah, I would not view it as an acceleration. I think it would be-- I view it as a continuation. We always want to make sure we have authorized shares to continue to execute the way we have been. And those needs to talk over time. We have tried to size it appropriately based upon sort of earnings and capital generation and so I think when we talk with the board about sort of the authorization, it was much more of a continuance of what we have been doing as opposed to sort of any acceleration of what we have been doing. Got it. Thank you. you very much.

Thank you. Our next question comes from the line of Roland Meyer of RBC Capital Markets. Your line is now open.

Hi. Good morning. I guess just going quickly off Mihir's question. On the quarter to date disclosure on the buyback, is that just slowed down because you are in blackout and that was set prior to the stock moving higher?

Roland, it is Nathaniel. I think we have been what we have been talking about for some time is really trying to size the share repurchases in this in this market where we are not really growing the in force, credit conditions remain good, we are generating a lot of organic capital that we do not think we can prudently redeploy into the business, trying to size the share repurchases approximately equal to the net income. And that is you know, we are not we are not exactly what the net income is going to be, obviously, in any period. But I think if you look on a you know, 6-month rolling 12-month basis, we have done a pretty good job of triangulating the share repurchases to be approximately equal to that and then slowly drawing down the excess liquidity and capital at the holding company via the shareholder dividend every quarter So it is not going to be possible, I think, for us to get it exactly right each quarter, but you know, we are we are largely targeting share repurchases to be approximate to net income in this kind of environment. Thank you. And then I guess a lot of your risk in force remains in the pre-22 years. As those policies age, are we approaching any sort of cliff where larger portions detach as the, you know, LTV hit 78%? Yes, it is Nathaniel again. I appreciate the question. And it is something that we actually talked about quite a bit internally lately, and if you think about a book of business for us, it is really across the LTV spectrum, you know, a lot of 85s, 90s, 95s and a significant amount of 97 LTV business even in those years. Most of the 85 LTV loans from those book years have already-- that were borrower paid subject to the Homeowners Protection Act have already canceled their coverage. It becomes more concentrated in the higher LTVs, but there is really no cliff event because there is a distribution of interest rates within those years too. At lower rates, you get to that point faster, but you know, for a 95 or 2097, it is still several years. So it is happening every month that falloff happens. We estimate about maybe 4 to 5 percentage points of our falloff. So persistency of 83%, about 5 percentage points of that 17% that is falling off is due to the homeowners protection act. And it is really been that way for the last we started tracking this more closely in the last several years, but 4 or 5 years ago, it was about the same. So this is, you know, something that is kind of in the background, but it is I think it is pretty embedded in persistency and has been over time. So you know, we do not see a big cliff coming or anything like that. it is just something that is happening every month. Thank you.

And then if I could just sneak 1 more in. it is a soft P and C market, and I am just curious if excess capital and reinsurance markets is helping you secure better terms on your own purchases.

I think a reinsurance, I think in any markets, right, that are adjacent or that reinsurers are trying to think about how to deploy their capital and where returns are, it can have an impact. I think our continued sort of activities in the market and sort of programmatically of going about it helps us as well. And I think it is true that from a from a broader MI industry standpoint, the fact that GSEs have laid off less risk into those markets has probably helped us bring more, reinsurers to the table. Because if they are looking for, mortgage credit in The US, the MIs and MGIC are 1 spot that they can get it pretty consistently. So I think all those things have been beneficial to us as we look to place reinsurance in those markets. Thank you. Have a great rest of your summer. Sure. You too.

Thank you. Our next question comes from the line of Geoffrey Dunn of Dowling and Partners. Your line is now open.

Thanks. Good morning. I had another question on reinsurance. Specifically, how do you go about approaching the incremental level of reinsurance you want to put on a forward book? So, you know, obviously, you do not have a crystal ball about future credit. How did you just on the 2027 XOL, for example, how did you decide on the loss band that you wanted to achieve Does capital management come into play on that excess capital? Just some color on how you think about approaching incremental reinsurance, whether it is XOL or ILN.

Yeah, Jeff, it is Nathaniel. Appreciate the question. I mentioned before, we really think about our reinsurance program across, you know, the 3 key dimensions are quota share reinsurance, traditional, XOL, and the ILN market. it is not exactly the case every book year, but we try to do about a 1/3 of the risk sharing across each of those 3 categories. So, you know, we have done up to, say, 40% quota shares, the excess of loss deals that we have done in recent years have allocated about 30% of the risk to them, and, you know, that leaves about 30% of the risk for the ILN market. Which I think has worked quite well for us. In terms of actual structuring of the individual transactions, you know, there is a I think there are there is a pretty consistent pattern that has emerged in terms of what works well with reinsurers. So you are trying to see maybe first dollar loss would be less efficient from a capital standpoint and less alignment of interest from reinsurers perspective. So, you know, us retaining a meaningful amount of the initial and first loss position, I think, is helpful. So detachment points across maybe ILN and excess of loss structures where if the PMIERs requirement, let's say is 7%, traditional structure would be the MIs MGIC and others that we observe in the market, retaining the first, say, 2.5 to 3% of that and then seeding the next, say, 0.5% to 4% up to the PMIERs level. And I think that has emerged that way because that works quite well for reinsurers. it is quite risk remote. And then the cost of capital is very attractive from our perspective. So I think a combination of those factors leads to a you know, kind of a normalization in what structures look like. I do not think it means you cannot do other things, but those other things come with additional costs. Right now, we feel like we are, we are putting a lot of protection on the recent vintages, which is our goal.

And how does the layering of XOL and ILN work? If you are attaching at 3% on an ILN, are you laying off the 2% to 3% band through the traditional XOL? How does that mechanically work?

Yeah. it is if you think about it, in, like, maybe the quota share terms, so in a 40% quota share you know, we are ceding 40% of the premium and 40% of the losses. and 40% of the associated capital requirement. Those deals obviously have a profit commission, makes them in attractive times, you know, more beneficial than a straight quarter share to us. But we are still retaining at a loan level the remaining 60% of the risk We then have that 60% at the loan level to allocate to other deals. When I say 30%, it is not 30%, say, of the layer or 30% of the loans. it is really 30% of our retention of our risk in force, at the loan level is going into the excess of loss deal. So the same loan on our, say, 2024 vintage or 2025 where we have you know, quota share, excess of loss, and ILN coverage. The same loan would be in all 3 of those deals. Just maybe 40% of the risk of that loan in 1 deal, 30% in another, and 30% in another. So it is you know, we do not have to-- they sit side by side versus maybe being below or on top of 1 another.

Okay. Great. Thank you.

Thank you. There are no further questions. I will now turn the call back over to management for closing remarks. Thank you, Ari.

Let me thank everyone for your interest in MGIC. Have a great rest of your week.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.