MGIC Investment Q2 2026 Earnings Report

MGIC Investment EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.76
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $0.82

MGIC Investment Revenue Results

• Actual Revenue: $295.39 million
• Expected Revenue: $297.54 million
• Beat/Miss: Missed by -$2.15 million
• YoY Revenue Growth: -2.90%

MGIC Investment Announcement Details

• Quarter: Q2 2026
• Date: 7/29/2026
• Time: After Market Closes
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 10:00AM ET

MGIC Investment (NYSE:MTG) (NYSE: MTG) is a leading provider of private mortgage insurance in the United States. Established in 1957 as the nation’s first private mortgage insurer, MGIC helps lenders manage credit risk and facilitates homeownership by protecting mortgage loans against default. Headquartered in Milwaukee, Wisconsin, the company operates through its principal subsidiary, Mortgage Guaranty Insurance Corporation, and maintains relationships with a broad network of originators and servicers nationwide.

The company’s primary business activity involves issuing mortgage insurance policies that enable borrowers to purchase homes with down payments below traditional lending thresholds. MGIC offers both borrower-paid and lender-paid insurance plans, tailoring coverage to meet the needs of first-time buyers, move-up purchasers and refinancing homeowners. Beyond individual mortgage insurance, the firm provides pool insurance and other reinsurance solutions that enhance liquidity for mortgage lenders and investors.

MGIC serves mortgage originators and financial institutions across all 50 states, Puerto Rico and other U.S. territories. Its risk management services include automated underwriting tools, credit analysis platforms and ongoing loan monitoring capabilities. These offerings help lenders streamline the loan approval process, comply with regulatory requirements and manage portfolio performance over the life of the mortgage.

Over its more than six decades of operation, MGIC has played a pivotal role in shaping the private mortgage insurance industry. The company is led by President and Chief Executive Officer Nathan K. Mark, who has overseen strategic initiatives aimed at expanding digital underwriting and enhancing customer service. As a publicly traded entity under the MTG ticker, MGIC Investment Corporation remains focused on sustaining financial strength and supporting affordable homeownership across the U.S.

MGIC Investment Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Net income rose to $182 million, or $0.86 per diluted share, producing a 14.5% annualized return on equity. Book value per share increased 10% year over year to $24.27, supported partly by $43 million of favorable loss-reserve development.
• Positive Sentiment: Second-quarter new insurance written increased 8.5% year over year to $18 billion, the company’s highest level since the third quarter of 2022. Insurance in force reached $305 billion, up 2.6% from a year ago, while persistency of 83% was broadly in line with expectations.
• Neutral Sentiment: Management characterized credit trends as broad-based normalization rather than deterioration, citing low early-payment defaults and no notable geographic or vintage-specific weakness. However, delinquencies increased 16 basis points year over year to 2.37%, and seasonal increases are expected in the second half.
• Positive Sentiment: MGIC expanded its reinsurance program with up to $168 million of protection on eligible 2027 new insurance written. Reinsurance reduced PMIERs required assets by $3.1 billion, or approximately 52%, supporting capital flexibility and reducing loss volatility.
• Positive Sentiment: The board raised the quarterly dividend 13% to $0.17 per share, marking six consecutive years of increases, while the company continued share repurchases. Management expects full-year operating expenses near the low end of its previously stated $190 million–$200 million range.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to the MGIC Investment Corporation second quarter 2026 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'll have a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I will now turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead.

[Dianna Higgins, Head of Investor Relations at MGIC Investment Corporation]

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 Tim Mattke, Chief Executive Officer, and Nathan 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.

[Dianna Higgins, Head of Investor Relations at MGIC Investment Corporation]

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-K 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 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 8-K or 10-Q. With that, I now have the pleasure to turn the call over to Tim.

[Tim Mattke, CEO at MGIC Investment Corporation]

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 $0.60 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.

[Tim Mattke, CEO at MGIC Investment Corporation]

We expect the increase is due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market. Insurance in force end of 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. We 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.

[Tim Mattke, CEO at MGIC Investment Corporation]

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 Nathan to provide more details on our financial results and capital management activities for the quarter.

[Nathan Colson, CFO at MGIC Investment Corporation]

Thanks, Tim. 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 seven 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%.

[Nathan Colson, CFO at MGIC Investment Corporation]

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 three years. 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 one basis point in the past three years. With high persistency expected in 2026. MI origination trends 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%.

[Nathan Colson, CFO at MGIC Investment Corporation]

During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield, 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 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-$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 $0.15 per share.

[Nathan Colson, CFO at MGIC Investment Corporation]

We also repurchased 6.6 million shares of stock for $177 million. Over the prior four 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 six 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 Tim.

[Tim Mattke, CEO at MGIC Investment Corporation]

Thanks, Nathan. 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're 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've thoughtfully refined over time. This long-term approach has supported our competitive position, driven strong business performance, and generated meaningful returns for shareholders.

[Tim Mattke, CEO at MGIC Investment Corporation]

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.

[Operator]

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 star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

[Terry Ma, Analyst at Barclays]

Hey, thank you. Good morning. Just want to get your latest thoughts on credit. I think, Nathan, 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're certainly in that ballpark the last two quarters. Is there any color you can kind of provide on new notices by region or even vintage that can maybe just inform our view of credit going forward?

[Nathan Colson, CFO at MGIC Investment Corporation]

Yeah. Terry, it's Nathan. Thanks for the question. 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 kind of 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 don't see a lot of difference in the mix, and we're not seeing it geographically. We're not seeing it really correlated to, say, home price changes in various states.

[Nathan Colson, CFO at MGIC Investment Corporation]

Again, something that makes us feel confident that we're 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.

[Terry Ma, Analyst at Barclays]

Got it. If we think about the cure rate, all the post-COVID vintages, about 90% of new notices cure within four quarters. I think, Tim, when I had you on stage at my conference a few years ago, you gave a number pre-pandemic that was lower than 90%. I'm just wondering, as we track all the data, 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.

[Nathan Colson, CFO at MGIC Investment Corporation]

Curious, Nathan. I maybe think about it less at a particular point in time in terms of maybe 12 months after delinquency. What we're really focused on is what is the ultimate claim rate going to be on a group of new notices. When we set our initial expectations at 7.5%, that's looking on a fully developed basis, what percent of those new notices are ultimately going to result in a claim? The consistent favorable development that we've had as a result of actual claim rates being quite a bit lower than that 7.5% that we were putting up initially.

[Nathan Colson, CFO at MGIC Investment Corporation]

I will say, we've talked about this over the last couple of calls too, we're coming off the kind of lowest point for us for the new notice claim rate was the second quarter of 2020, the kind of peak COVID quarter, which ultimate claim rates are less than 1% out of that group. We're certainly not running at that level anymore. Today it looks like fully developed notice quarters, maybe from, say, two or three years ago are more in that 2%-3% range. More recent, maybe trending slightly higher than that. Fully developed notice quarters today, we might be thinking 3%-4% ultimate claim rates. Still quite a bit lower than what we're expecting on new notices.

[Nathan Colson, CFO at MGIC Investment Corporation]

I think that's because the actual conditions have played out quite favorably over the last two or three years, although there's been a lot of uncertainty at every point along the way. I think we still feel quite comfortable with our initial new notice expectations. 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.

[Terry Ma, Analyst at Barclays]

Got it. Thanks for the color.

[Nathan Colson, CFO at MGIC Investment Corporation]

Thank you.

[Operator]

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

[Bose George, Analyst at KBW]

Hey, guys. Good morning. Just first wanted to just ask about competitive trends in the market. Anything to call out there? Your gross premium yield, it looks like it ticked down a tiny bit. Is that just noise?

[Tim Mattke, CEO at MGIC Investment Corporation]

Yeah, Bose, from competitive dynamics, again, it's a competitive marketplace, right? With six active participants. I wouldn't say anything stands out in this quarter. As you said, when we look at sort of the gross premium rate, which is what we really focus on, it did grind down a little bit more this quarter, and that's sort of been the trend over the last couple of years, quite frankly. Not any major changes quarter-to-quarter, but the trend has been slightly downwards. Not unexpected from our standpoint. Again, nothing that has changed in the sort of competitive marketplace that's caused that. It has been the general sort of form of direction, but not anything that's sort of steepening or anything in that regard.

[Bose George, Analyst at KBW]

Okay, great. Thanks. Actually on reinsurance, you guys did the transaction. Just can you compare the execution in the traditional reinsurance versus the ILN market? Is the benefit here more structural, or is the pricing better here? Just, yeah, can you just contrast the two?

[Nathan Colson, CFO at MGIC Investment Corporation]

Yep. Bose, it's Nathan. I think the biggest thing, the XOL that we just did is covering 2027 NIW, whereas the ILN market is all on a kind of a warehoused, already in-force loan. We have to spend time to build a pool. I think there's also a lot of fixed costs associated with doing those deals and kind of size requirements that are expected in the market, whereas you can do smaller reinsurance deals. Our intention is to be programmatic in both the excess of loss and ILN markets. The ILN deals are individually a little bit larger. Since we have to warehouse the risk, just happen at a slightly less frequent cadence. We've done deals pretty consistently. We've had fill-up periods as short as five months in the ILN market and as long as maybe two years, just depending on volume.

[Nathan Colson, CFO at MGIC Investment Corporation]

It's a market that we want to continue to operate in, I don't view the excess of loss deal that we did covering our 2027 NIW as indicative of we're not interested in the ILN market. They're just kind of different executions in different parts of our program.

[Bose George, Analyst at KBW]

Okay, great. Thanks.

[Operator]

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

[Mihir Bhatia, Analyst at Bank of America]

Good morning. Thank you for taking my question. I just wanted to maybe first just start big picture, just given the, I think you talked a little bit about credit conditions, but just given moving rates, housing, and your view on the housing fundamentals, maybe talk about industry NIW this year. 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.

[Tim Mattke, CEO at MGIC Investment Corporation]

Yeah. No, Mihir, appreciate the question. I think as far as the market goes, the size has been fairly consistent what we had expected coming into the year, right? There's modest home price appreciation out there in certain parts. Purchase, again, it was our second largest NIW since 2022, and up from where we were a year ago. 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. So again, I don't think we bank on that changing. Again, for us, that's normally churn in the portfolio as opposed to things that really helps us grow in force. Affordability definitely continues to be stretched, again, with where interest rates are and where home prices are. I think it makes it difficult to see

[Tim Mattke, CEO at MGIC Investment Corporation]

A large change in sort of people coming to be buyers in this market. I think you can see there's some thawing and sort of lock-in effect as far as people willing to sell their homes that have good interest rates. Again, as interest rates remain high generally, that makes it tougher to see that really sort of break loose in a meaningful way. Again, I'm a general believer that sort of the market we have felt for this quarter and feels like we've been in for the last year for the most part in the little mini refi ways is sort of what we're in for the foreseeable future. That doesn't create a lot of growth for us. As Nathan said, we'd love to grow the in-force portfolio.

[Tim Mattke, CEO at MGIC Investment Corporation]

Really, we want to do that if the overall sort of pie is growing, and if it's not growing, we're content to return that capital to shareholders if we think that's the right answer.

[Mihir Bhatia, Analyst at Bank of America]

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

[Nathan Colson, CFO at MGIC Investment Corporation]

Yeah. Mihir, it's Nathan. I would say from an actual underwriting guideline perspective, there really hasn't been meaningful changes in quite some time from our guidelines. The mix of business has been quite consistent as well. I think if anything, over the last two years, there's been a slight decrease in the amount of above 45 DTI business that's been done. That's maybe the most notable change that I would see that wasn't necessarily a result of guideline changes by us. I think just what was getting done in the market changed a little bit. I think we're quite comfortable with the mix that we're getting and the risk-adjusted returns really across the spectrum. I don't feel a need to make any meaningful underwriting changes right now given expected performance or actual performance to date.

[Mihir Bhatia, Analyst at Bank of America]

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

[Tim Mattke, CEO at MGIC Investment Corporation]

Yeah, I wouldn't view it as an acceleration. I think I'd view it as continuation. We always want to make sure we have authorized shares to continue to execute the way we have been. As Nathan's talked over time, we've tried to size it appropriately based upon sort of earnings and capital generation. I think when we talked with the board about sort of the authorization, it was much more of a continuance of what we've been doing as opposed to sort of any acceleration of what we have been doing.

[Mihir Bhatia, Analyst at Bank of America]

Got it. Thank you. Thank you for taking my questions.

[Operator]

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

[Rowland Mayor, Analyst at RBC Capital Markets]

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're in blackout and that was set prior to the stock moving higher?

[Nathan Colson, CFO at MGIC Investment Corporation]

Yeah. Rowland, it's Nathan. I think what we've been talking about for some time is really trying to size the share repurchases in this market where we aren't really growing the in-force. Credit conditions remain good. We're generating a lot of organic capital that we don't think we can prudently redeploy into the business. Trying to size the share repurchases approximately equal to the net income. We're not exactly sure what the net income's going to be, obviously, in any period. I think if you look on a six-month, rolling 12-month basis, we've 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. It's not going to be possible, I think, for us to get it exactly right each quarter.

[Nathan Colson, CFO at MGIC Investment Corporation]

We're largely targeting share repurchases to be approximate net income in this kind of environment.

[Rowland Mayor, Analyst at RBC Capital Markets]

Thank you. 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 LTV hits 78?

[Nathan Colson, CFO at MGIC Investment Corporation]

Yes, it's Nathan again. I appreciate the question. It's something that we actually talked about quite a bit internally lately. If you think about a book of business for us, it's really across the LTV spectrum from a lot of 85s, 90s, 95, and a significant still amount of 97 business even in those years. Most of the 85 LTV loans from those book years that were borrower paid subject to the Homeowners Protection Act have already canceled their coverage. It becomes more concentrated in the higher LTVs. There's really no cliff event because there's a distribution of interest rates within those years, too. At lower rates, you get to that point faster. For a 95 or 97, it's still several years. It's happening every month that that fall-off happens. We estimate about maybe four to five percentage points of our fall-off.

[Nathan Colson, CFO at MGIC Investment Corporation]

Persistency is, say, 83%, about five percentage points of that 17 that's falling off is due to the Homeowners Protection Act. It's really been that way for the last-- We started tracking this more closely in the last several years, but four or five years ago, it was about the same. This is something that's kind of in the background, but I think it's pretty embedded in persistency and has been over time. We don't see a big cliff coming or anything like that. It's just something that's happening every month.

[Rowland Mayor, Analyst at RBC Capital Markets]

Thank you. Then if I could just sneak one more. It's a soft P&C market, and I'm just curious if excess capital in reinsurance markets is helping you secure better terms on your own purchases.

[Tim Mattke, CEO at MGIC Investment Corporation]

I think from reinsurance, anything markets 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. I think it's true that 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're looking for mortgage credit in the U.S., the MIs and MGIC are one spot that they can get it pretty consistently. I think that all those things have been beneficial to us as we look to place reinsurance in those markets.

[Rowland Mayor, Analyst at RBC Capital Markets]

Thank you. Have a great rest of your summer.

[Tim Mattke, CEO at MGIC Investment Corporation]

Sure. You too. Thank you.

[Operator]

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

[Geoffrey Dunn, Analyst at Dowling & Partners]

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? Obviously, you don't have a crystal ball about future credit. 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.

[Nathan Colson, CFO at MGIC Investment Corporation]

Yeah. Geoff, it's Nathan. Appreciate the question. I mentioned before that we really think about our reinsurance program across the three key dimensions are quota share reinsurance, traditional XOL, and the ILN market. It's not exactly the case every book year, but we try to do about a third of the risk-sharing across each of those three categories. We've done up to, say, 40% quota shares. The excess of loss deals that we've done in recent years have allocated about 30% of the risk to them, and 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, I think there are transactions, there's a pretty consistent pattern that has emerged in terms of what works well with reinsurers.

[Nathan Colson, CFO at MGIC Investment Corporation]

Trying to cede maybe first dollar loss would be less efficient from a capital standpoint and less alignment of interest from reinsurers' perspective. Us retaining a meaningful amount of the initial and first loss position, I think, is helpful. 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%-3% of that, and then ceding the next, say, 3.5%-4% up to the PMIERs level. I think that has emerged that way because that works quite well for reinsurers. It's quite risk remote, and then the cost of capital is very attractive from our perspective. I think a combination of those factors leads to a kind of a normalization in what structures look like.

[Nathan Colson, CFO at MGIC Investment Corporation]

I don't think it means that you can't do other things, but those other things come with additional cost. Right now we feel like we're putting a lot of protection on the recent vintages, which is our goal.

[Geoffrey Dunn, Analyst at Dowling & Partners]

How does the layering of XOL and ILN work? If you're attaching a 3% on an ILN, are you laying off the 2%-3% band through the traditional XOL? How does that mechanically work?

[Nathan Colson, CFO at MGIC Investment Corporation]

Yeah. If you think about it in like maybe the quota share terms, on a 40% quota share, we're ceding 40% of the premium and 40% of the losses and 40% of the associated capital requirement. Those deals obviously have a profit commission, which makes them, in attractive times, more beneficial than a straight quota share to us. We're still retaining at a loan level the remaining 60% of the risk. We have that 60% at the loan level to allocate to other deals. When I say 30%, it's not 30%, say, of the layer or 30% of the loans, it's really 30% of our retention of our risk in force at the loan level is going into the excess of loss deal.

[Nathan Colson, CFO at MGIC Investment Corporation]

The same loan on our, say, 2024 vintage or 2025, where we have quota share excess of loss and ILN coverage, the same loan would be in all three of those deals. Just maybe 40% of the risk of that loan in one deal, 30% in another, and 30% in another. They sit side by side versus maybe being below or on top of one another.

[Geoffrey Dunn, Analyst at Dowling & Partners]

Okay, great. Thank you.

[Tim Mattke, CEO at MGIC Investment Corporation]

Thank you.

[Operator]

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

[Tim Mattke, CEO at MGIC Investment Corporation]

Thank you, Ari. I want to thank everyone for your interest in MGIC. Have a great rest of your week.

[Operator]

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

Participants

Executives

• Dianna Higgins, Head of Investor Relations
• Tim Mattke, CEO
• Nathan Colson, CFO

Analysts

• Terry Ma, Analyst at Barclays
• Bose George, Analyst at KBW
• Mihir Bhatia, Analyst at Bank of America
• Rowland Mayor, Analyst at RBC Capital Markets
• Geoffrey Dunn, Analyst at Dowling & Partners