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Press Release

MGIC Investment Corporation Reports Third Quarter 2021 Results

Nov 3, 2021
Third Quarter 2021 Net Income of $158.0 million or $0.46 per Diluted Share
Third Quarter 2021 Adjusted Net Operating Income (Non-GAAP) of $157.1 million or $0.46 per Diluted Share

MILWAUKEE, Nov. 3, 2021 /PRNewswire/ -- MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the third quarter of 2021. Net income for the quarter was $158.0 million, or $0.46 per diluted share, compared with net income of $130.8 million, or $0.38 per diluted share, for the third quarter of 2020.

Adjusted net operating income for the third quarter of 2021 was $157.1 million, or $0.46 per diluted share, compared with $149.9 million, or $0.43 per diluted share, for the third quarter of 2020. We present the non-GAAP financial measure "Adjusted net operating income" to increase the comparability between periods of our financial results. See "Use of Non-GAAP financial measures" below.

Tim Mattke, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC"), said, "I am pleased to report that the high quality of our increased insurance in force combined with a strong housing market, a decreasing number of new delinquencies, and improving economic conditions as many local economies continue to return to pre-pandemic levels of activity, allowed us to deliver another quarter of strong financial results for shareholders."

Mattke further stated, "Reflecting our robust capital position, the long-term confidence in our transformed business model and our market position, we repurchased 3.0% of shares outstanding in the third quarter totaling $150 million, and in October we repurchased an additional 1.1% shares outstanding totaling $60 million. Additionally, our Board of Directors authorized a $500 million share repurchase program, which is in addition to the amount remaining on the current authorization, and approved a quarterly $0.08/share common stock dividend to be paid on November 23, 2021."

Third Quarter Summary

  • New insurance written was $28.7 billion, compared to $33.6 billion the second quarter of 2021 and $32.8 billion in the third quarter of 2020, reflecting a decrease in the refinance market.
  • Persistency, or the percentage of insurance remaining in force from one year prior, was 59.5% at September 30, 2021, compared with 57.1% at June 30, 2021 and 64.5% at September 30, 2020.
  • Insurance in force of $268.4 billion at September 30, 2021 increased by 2.4% during the quarter and 12.3% compared to September 30, 2020.
  • Primary delinquency inventory of 37,379 loans at September 30, 2021 decreased from 42,999 loans at June 30, 2021, and 64,418 loans at September 30, 2020.
    • As of September 30, 2021, 48% of the loans in our delinquency inventory were reported to us as subject to forbearance plans. We believe substantially all of the reported forbearance plans are COVID-19 related.
    • The percentage of loans insured with primary insurance that were delinquent at September 30, 2021 was 3.20%, compared to 3.71% at June 30, 2021, and 5.79% at September 30, 2020.
  • The loss ratio for the third quarter of 2021 was 8.1%, compared to 11.6% for the second quarter of 2021 and 15.9% for the third quarter of 2020.
  • The underwriting expense ratio associated with our insurance operations for the third quarter of 2021 was 21.9%, compared to 22.3% for the second quarter of 2021 and 20.2% for the third quarter of 2020.
  • Net premium yield was 38.4 basis points in the third quarter of 2021, compared to 39.1 basis points for the second quarter of 2021 and 43.6 basis points for the third quarter of 2020.
  • We paid a dividend of $0.08 per common share to shareholders during the third quarter of 2021.
  • Book value per common share outstanding increased by 6.7% from December 31, 2020 to $14.81 and increased by 11.1% from September 30, 2020. (September 30, 2021 book value per common share outstanding includes $0.59 in net unrealized gain on securities, compared to $0.80 at December 31, 2020 and $0.72 at September 30, 2020).
  • We repurchased 10.0 million shares of common stock at an average cost of $15.01 per share.
  • MGIC paid a $150 million dividend to MGIC Investment Corporation.
  • In August 2021, MGIC entered into a $398.4 million excess of loss reinsurance agreement (executed through an insurance linked notes transaction) that covers the vast majority of policies issued from January 1, 2021 through May 28, 2021.

_______________

Fourth Quarter 2021 Activities

  • In October, we repurchased an additional 1.1% shares outstanding totaling $60 million under the remaining authorization that expires at year end 2021.
  • Our Board of Directors authorized an additional $500 million common stock repurchase program through the end of 2023.
  • We declared a dividend of $0.08 per common share to shareholders payable on November 23, 2021, to shareholders of record at the close of business on November 11, 2021.
  • MGIC elected to terminate its 2017 and 2018 QSR Transactions effective December 31, 2021, and will incur an early termination fee of $5 million at December 31, 2021.

Revenues

Total revenues for the third quarter of 2021 were $295.7 million, compared to $296.0 million in the third quarter last year. Premiums earned decreased slightly in the third quarter of 2021 to $254.8 million compared with $256.1 million for the same period the prior year. Net premiums written for the quarter were $247.6 million, compared to $228.0 million for the same period last year. The increase in net premiums written was due to an increase in insurance inforce and an increase in profit commission, partially offset by a decrease in the premium yield and an increase in ceded premiums written. Profit commission was lower in the third quarter of 2020 due to higher ceded incurred losses resulting from the impacts of the COVID-19 pandemic.  The decrease in net premiums earned was due to a decrease in accelerated premiums earned from single premium policy cancellations given the decrease in refinance activity, partially offset by the increase in net premiums written.

Losses and expenses

Losses incurred   
Net losses incurred were $20.8 million, compared to $40.7 million in the same period last year. In the third quarter of 2021, we received 9,862 new delinquency notices compared with 20,924 notices in the third quarter of the prior year primarily reflecting the impact of the COVID-19 pandemic in the third quarter of 2020. Our re-estimation of reserves on previous delinquencies resulted in $18 million of favorable loss development in the third quarter of 2021 primarily attributable to delinquency notices received prior to the start of the COVID-19 pandemic compared to insignificant loss reserve development in the third quarter of 2020. In the third quarter of 2021, our adjustments to our incurred but not reported, or IBNR, reserve were insignificant compared to a decrease of $27 million in the third quarter of 2020.  

Underwriting and other expenses
Net underwriting and other expenses were $57.2 million in the third quarter of 2021, compared to $48.5 million in the same period last year primarily due to increases in professional and consulting services related to our investments in infrastructure as well as increases in employee compensation costs.

Interest expense
Interest expense was $18.0 million in the third quarter of 2021, compared to $15.7 million in the same period last year. The increase is due to the August 2020 issuance of our 5.25% Senior Notes, partially offset by the repurchase of a portion of our 5.75% Senior Notes and 9% Convertible Junior Debentures.

Loss on debt extinguishment
In the third quarter of 2020, the $26.7 million loss on debt extinguishment reflects the repurchase of a portion of our 5.75% Senior Notes in excess of carrying value and a portion of our 9% Convertible Junior Debentures in excess of their fair value.

Provision for income taxes
The effective income tax rate was 20.9% in the third quarter of 2021 and 20.4% in the third quarter of 2020.

Capital

  • Total consolidated shareholders' equity was $4.9 billion as of September 30, 2021, compared to $4.7 billion as of December 31, 2020 and $4.5 billion as of September 30, 2020.
  • MGIC's PMIERs Available Assets totaled $5.8 billion, or $2.6 billion above its Minimum Required Assets as of September 30, 2021, compared to PMIERs Available Assets of $5.3 billion, or $1.8 billion above its Minimum Required Assets as of December 31, 2020 and PMIERs Available Assets of $5.0 billion, or $1.4 billion above its Minimum Required Assets as of September 30, 2020

Other Balance Sheet and Liquidity Metrics

  • Total consolidated assets were $7.5 billion as of September 30, 2021, compared to $7.4 billion as of December 31, 2020, and $7.1 billion as of September 30, 2020.
  • The fair value of our consolidated investment portfolio, cash and cash equivalents was $7.1 billion as of September 30, 2021, compared to $7.0 billion as of December 31, 2020, and $6.8 billion as of September 30, 2020.
  • The fair value of investments, cash and cash equivalents at the holding company was $716 million as of September 30, 2021, compared to $847 million as of December 31, 2020, and $871 million as of September 30, 2020.
  • Total consolidated debt as of September 30, 2021, December 31, 2020 and September 30, 2020 was $1.2 billion.

Conference Call and Webcast Details
MGIC Investment Corporation will hold a conference call November 4, 2021, at 10 a.m. ET to allow securities analysts and shareholders the opportunity to hear management discuss the company's quarterly results. The conference call number is 1-866-834-4126. The call is being webcast and can be accessed at the company's website at http://mtg.mgic.com/. A replay of the webcast will be available on the company's website through December 4, 2021 under "Newsroom."

About MGIC
Mortgage Guaranty Insurance Corporation (MGIC) (www.mgic.com), the principal subsidiary of MGIC Investment Corporation, serves lenders throughout the United States, Puerto Rico, and other locations helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality through the use of private mortgage insurance. At September 30, 2021, MGIC had $268.4 billion of primary insurance in force covering more than 1.1 million mortgages.

This press release, which includes certain additional statistical and other information, including non-GAAP financial information and a supplement that contains various portfolio statistics, are all available on the Company's website at https://mtg.mgic.com/ under "Newsroom."

From time to time MGIC Investment Corporation releases important information via postings on its corporate website, and via postings on MGIC's website for information related to underwriting and pricing, and intends to continue to do so in the future. Such postings include corrections of previous disclosures, and may be made without any other disclosure. Investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information for MGIC Investment Corporation alerts can be found at https://mtg.mgic.com/shareholder-services/email-alerts. For information about our underwriting and rates, see https://www.mgic.com/underwriting.

Safe Harbor Statement

Forward Looking Statements and Risk Factors: 
Our actual results could be affected by the risk factors below. These risk factors should be reviewed in connection with this press release and our periodic reports to the Securities and Exchange Commission ("SEC"). These risk factors may also cause actual results to differ materially from the results contemplated by forward looking statements that we may make. Forward looking statements consist of statements which relate to matters other than historical fact, including matters that inherently refer to future events. Among others, statements that include words such as "believe," "anticipate," "will" or "expect," or words of similar import, are forward looking statements. These risk factors, including the discussion of the impact of the COVID-19 pandemic, speak only as of the date of this press release and are subject to change without notice as the Company cannot predict all risks relating to this evolving set of events. We are not undertaking any obligation to update any forward looking statements or other statements we may make even though these statements may be affected by events or circumstances occurring after the forward looking statements or other statements were made. No investor should rely on the fact that such statements are current at any time other than the time at which this press release was delivered for dissemination to the public.

While we communicate with security analysts from time to time, it is against our policy to disclose to them any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report, and such reports are not our responsibility.

Use of Non-GAAP financial measures
We believe that use of the Non-GAAP measures of adjusted pre-tax operating income (loss), adjusted net operating income (loss) and adjusted net operating income (loss) per diluted share facilitate the evaluation of the company's core financial performance thereby providing relevant information to investors. These measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as alternatives to GAAP measures of performance.

Adjusted pre-tax operating income (loss) is defined as GAAP income (loss) before tax, excluding the effects of net realized investment gains (losses), gain and losses on debt extinguishment, net impairment losses recognized in earnings and infrequent or unusual non-operating items where applicable.

Adjusted net operating income (loss) is defined as GAAP net income (loss) excluding the after-tax effects of net realized investment gains (losses), gain and losses on debt extinguishment, net impairment losses recognized in earnings, and infrequent or unusual non-operating items where applicable. The amounts of adjustments to components of pre-tax operating income (loss) are tax effected using a federal statutory tax rate of 21%.

Adjusted net operating income (loss) per diluted share is calculated in a manner consistent with the accounting standard regarding earnings per share by dividing (i) adjusted net operating income (loss) after making adjustments for interest expense on convertible debt, whenever the impact is dilutive, by (ii) diluted weighted average common shares outstanding, which reflects share dilution from unvested restricted stock units and from convertible debt when dilutive under the "if-converted" method.

Although adjusted pre-tax operating income (loss) and adjusted net operating income (loss) exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items represent items that are: (1) not viewed as part of the operating performance of our primary activities; or (2) impacted by both discretionary and other economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, along with the reasons for their treatment, are described below. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these adjustments. Other companies may calculate these measures differently. Therefore, their measures may not be comparable to those used by us.

(1)

Net realized investment gains (losses). The recognition of net realized investment gains or losses can vary significantly across periods as the timing of individual securities sales is highly discretionary and is influenced by such factors as market opportunities, our tax and capital profile, and overall market cycles.

(2)

Gains and losses on debt extinguishment. Gains and losses on debt extinguishment result from discretionary activities that are undertaken to enhance our capital position, improve our debt profile, and/or reduce potential dilution from our outstanding convertible debt.

(3)

Net impairment losses recognized in earnings. The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles, individual issuer performance, and general economic conditions.

(4)

Infrequent or unusual non-operating items. Items that are non-recurring in nature and are not part of our primary operating activities.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)












Three Months Ended

September 30,


Nine Months
Ended September 30,

(In thousands, except per share data)


2021


2020


2021


2020










Net premiums written


$

247,610



$

227,954



$

730,846



$

695,346


Revenues









Net premiums earned


$

254,844



$

256,113



$

761,428



$

760,576


Net investment income


38,282



37,252



117,304



118,278


Net realized investment gains


1,009



2,259



5,397



10,851


Other revenue


1,611



380



7,426



7,160


Total revenues


295,746



296,004



891,555



896,865


Losses and expenses









Losses incurred, net


20,766



40,686



89,566



319,016


Underwriting and other expenses, net


57,237



48,528



164,779



140,482


Loss on debt extinguishment




26,736





26,736


Interest expense


18,011



15,725



53,993



41,580


Total losses and expenses


96,014



131,675



308,338



527,814


Income before tax


199,732



164,329



583,217



369,051


Provision for income taxes


41,755



33,518



122,168



74,388


Net income


$

157,977



$

130,811



$

461,049



$

294,663


Net income per diluted share


$

0.46



$

0.38



$

1.33



$

0.85


 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

EARNINGS PER SHARE (UNAUDITED)












Three Months
Ended September 30,


Nine Months Ended
September 30,

(In thousands, except per share data)


2021


2020


2021


2020

Net income


$

157,977



$

130,811



$

461,049



$

294,663


Interest expense, net of tax:









9% Convertible Junior Subordinated Debentures due 2063


3,712



4,161



11,135



13,293


Diluted net income available to common shareholders


$

161,689



$

134,972



$

472,184



$

307,956











Weighted average shares - basic


335,938



338,598



338,045



340,408


Effect of dilutive securities:









Unvested restricted stock units


1,834



1,377



1,651



1,492


9% Convertible Junior Subordinated Debentures due 2063


15,785



17,220



15,785



18,489


Weighted average shares - diluted


353,557



357,195



355,481



360,389


Net income per diluted share


$

0.46



$

0.38



$

1.33



$

0.85


 

NON-GAAP RECONCILIATIONS


Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income




Three Months Ended September 30,



2021


2020

(In thousands, except per share amounts)


Pre-tax


Tax Effect


Net

(after-tax)


Pre-tax


Tax Effect


Net

(after-tax)

Income before tax / Net income


$

199,732



$

41,755



$

157,977



$

164,329



$

33,518



$

130,811


Adjustments:













Loss on debt extinguishment








26,736



5,615



21,121


Net realized investment gains


(1,115)



(234)



(881)



(2,624)



(551)



(2,073)


Adjusted pre-tax operating income / Adjusted
net operating income


$

198,617



$

41,521



$

157,096



$

188,441



$

38,582



$

149,859















Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share


Weighted average shares - diluted






353,557







357,195


Net income per diluted share






$

0.46







$

0.38


Loss on debt extinguishment












0.06


Net realized investment gains












(0.01)


Adjusted net operating income per diluted
share






$

0.46







$

0.43
















Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income




Nine Months Ended September 30,



2021


2020

(In thousands, except per share amounts)


Pre-tax


Tax Effect


Net

(after-tax)


Pre-tax


Tax Effect


Net

(after-tax)

Income before tax / Net income


$

583,217



$

122,168



$

461,049



$

369,051



$

74,388



$

294,663


Adjustments:













Loss on debt extinguishment








26,736



5,615



21,121


Net realized investment gains


(5,665)



(1,190)



(4,475)



(10,773)



(2,262)



(8,511)


Adjusted pre-tax operating income / Adjusted
net operating income


$

577,552



$

120,978



$

456,574



$

385,014



$

77,741



$

307,273















Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share


Weighted average shares - diluted






355,481







360,389















Net income per diluted share






$

1.33







$

0.85


Loss on debt extinguishment












0.06


Net realized investment gains






(0.01)







(0.02)


Adjusted net operating income per diluted
share






$

1.32







$

0.89


 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)










September 30,


December 31,


September 30,

(In thousands, except per share data)


2021


2020


2020

ASSETS







Investments (1)


$

6,916,195



$

6,682,911



$

6,365,878


Cash and cash equivalents


176,426



287,953



380,056


Restricted cash and cash equivalents


9,486



8,727



8,755


Reinsurance recoverable on loss reserves (2)


107,029



95,042



83,143


Home office and equipment, net


45,303



47,144



47,546


Deferred insurance policy acquisition costs


22,284



21,561



21,238


Other assets


234,586



211,188



242,894


Total assets


$

7,511,309



$

7,354,526



$

7,149,510









LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Loss reserves (2)


$

932,909



$

880,537



$

840,449


Unearned premiums


256,517



287,099



315,071


Federal home loan bank advance


155,000



155,000



155,000


Senior notes


880,976



879,379



878,838


Convertible junior debentures


208,814



208,814



208,814


Other liabilities


199,673



244,711



237,716


Total liabilities


2,633,889



2,655,540



2,635,888


Shareholders' equity


4,877,420



4,698,986



4,513,622


Total liabilities and shareholders' equity


$

7,511,309



$

7,354,526



$

7,149,510


Book value per share (3)


$

14.81



$

13.88



$

13.33









(1) Investments include net unrealized gains on securities


$

247,799



$

345,124



$

307,591


(2) Loss reserves, net of reinsurance recoverable on loss reserves


$

825,880



$

785,495



$

757,305


(3) Shares outstanding


329,335



338,573



338,573


 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION - NEW INSURANCE WRITTEN
















2021


2020


Year-to-date


Q3


Q2


Q1


Q4


Q3


2021


2020

New primary insurance written (NIW) (billions)

$

28.7



$

33.6



$

30.8



$

33.2



$

32.8



$

93.1



$

78.9
















Monthly (including split premium plans) and annual premium plans

26.5



31.4



27.9



31.3



30.6



85.8



70.7


Single premium plans

2.2



2.2



2.9



1.9



2.2



7.3



8.2
















Product mix as a % of primary NIW














FICO < 680

5

%


5

%


4

%


4

%


4

%


5

%


4

%

>95% LTVs

13

%


12

%


8

%


9

%


9

%


11

%


9

%

>45% DTI

15

%


13

%


12

%


11

%


11

%


13

%


11

%

Singles

8

%


7

%


9

%


6

%


7

%


8

%


10

%

Refinances

10

%


21

%


40

%


34

%


31

%


24

%


36

%















New primary risk written (billions)

$

7.4



$

8.5



$

7.2



$

7.9



$

7.9



$

23.1



$

18.9


 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION - INSURANCE IN FORCE and RISK IN FORCE












2021


2020


Q3


Q2


Q1


Q4


Q3

Primary Insurance In Force (IIF) (billions)

$

268.4



$

262.0



$

251.7



$

246.6



$

238.9


Total # of loans

1,161,907



1,151,692



1,130,362



1,126,079



1,111,910


Flow # of loans

1,130,056



1,118,713



1,096,132



1,090,877



1,075,794












Premium Yield










Inforce portfolio yield (1)

41.8



42.6



43.9



45.0



46.3


Premium refunds

(1.0)



(0.2)



(0.8)



(0.3)



(0.6)


Accelerated earnings on single premium

2.5



3.1



4.4



5.3



5.5


Total direct premium yield

43.3



45.5



47.5



50.0



51.2


Ceded premiums earned, net of profit commission and
assumed premiums (2)

(4.9)



(6.4)



(6.6)



(6.9)



(7.6)


Net premium yield

38.4



39.1



40.9



43.1



43.6












Average Loan Size of IIF (thousands)

$

231.0



$

227.5



$

222.7



$

219.0



$

214.9


Flow only

$

233.6



$

230.1



$

225.2



$

221.5



$

217.3












Annual Persistency

59.5

%


57.1

%


56.2

%


60.5

%


64.5

%











Primary Risk In Force (RIF) (billions)

$

67.2



$

65.3



$

62.6



$

61.8



$

60.4


By FICO (%) (3)










FICO 760 & >

42

%


41

%


41

%


40

%


40

%

FICO 740-759

17

%


17

%


17

%


17

%


17

%

FICO 720-739

14

%


14

%


14

%


14

%


14

%

FICO 700-719

11

%


11

%


11

%


11

%


11

%

FICO 680-699

8

%


8

%


8

%


8

%


8

%

FICO 660-679

3

%


4

%


4

%


4

%


4

%

FICO 640-659

2

%


2

%


2

%


3

%


3

%

FICO 639 & <

3

%


3

%


3

%


3

%


3

%











Average Coverage Ratio (RIF/IIF)

25.1

%


24.9

%


24.9

%


25.1

%


25.3

%











Direct Pool RIF (millions)










With aggregate loss limits

$

207



$

208



$

209



$

210



$

211


Without aggregate loss limits

$

106



$

114



$

122



$

130



$

139




(1)

Total direct premiums earned, excluding accelerated premiums from premium refunds and single premium policy cancellations divided by average
primary insurance in force.

(2)

Ceded premiums earned, net of profit commissions and assumed premiums. Assumed premiums include our participation in GSE Credit Risk Transfer programs, of which the impact on the net premium yield was 0.4 bps for the first nine months of 2021 and 0.5 bps in 2020.

(3)

The FICO credit score at the time of origination for a loan with multiple borrowers is the lowest of the borrowers' "decision FICO scores." A borrower's "decision FICO score" is determined as follows: if there are three FICO scores available, the middle FICO score is used; if two FICO scores are available, the lower of the two is used; if only one FICO score is available, it is used.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION - DELINQUENCY STATISTICS















2021

2020




Q3


Q2


Q1


Q4


Q3


Primary IIF - Delinquent Roll Forward - # of
Loans












Beginning Delinquent Inventory


42,999



52,775



57,710



64,418



69,326



New Notices


9,862



9,036



13,011



15,193



20,924



Cures


(14,813)



(18,460)



(17,628)



(21,584)



(25,446)



Paid claims


(298)



(346)



(312)



(312)



(375)



Rescissions and denials


(11)



(6)



(6)



(5)



(11)



Other items removed from inventory  (1)


(360)











Ending Delinquent Inventory (2)


37,379



42,999



52,775



57,710



64,418















Primary IIF Delinquency Rate


3.20

%


3.71

%


4.65

%


5.11

%


5.79

%


Primary claim received inventory included in
ending delinquent inventory


154



159



151



159



172















Primary IIF - # of Delinquent Loans - Flow only


33,271



38,715



47,880



52,459



58,933



Primary IIF Delinquency Rate - Flow only


2.93

%


3.44

%


4.35

%


4.80

%


5.48

%














Composition of Cures












Reported delinquent and cured intraquarter


2,727



2,334



3,452



3,304



4,405



Number of payments delinquent prior to cure












3 payments or less


3,346



5,378



5,547



6,425



13,954



4-11 payments


4,075



7,075



8,166



11,471



6,683



12 payments or more


4,665



3,673



463



384



404



Total Cures in Quarter


14,813



18,460



17,628



21,584



25,446















Composition of Paids












Number of payments delinquent at time
of claim payment












3 payments or less


2







3



1



4-11 payments


10



14



25



28



49



12 payments or more


286



332



287



281



325



Total Paids in Quarter


298



346



312



312



375















Aging of Primary Delinquent Inventory












Consecutive months delinquent












      3 months or less


6,948


19%

6,513


15%

9,194


17%

11,542


20%

15,879


25%

      4-11 months


9,371


25%

12,840


30%

29,832


57%

34,620


60%

37,702


58%

      12 months or more


21,060


56%

23,646


55%

13,749


26%

11,548


20%

10,837


17%













Number of payments delinquent












      3 payments or less


8,911


24%

8,619


20%

11,440


22%

14,183


25%

18,541


29%

      4-11 payments


11,165


30%

14,894


35%

25,016


47%

35,977


62%

38,999


60%

      12 payments or more


17,303


46%

19,486


45%

16,319


31%

7,550


13%

6,878


11%



(1)

Items removed from inventory are associated with commutations of coverage on non-performing policies.

(2)

As of September 30, 2021 48% of our delinquency inventory were reported to us as subject to forbearance plan, down from a high of 67% at June 30,
2020. We believe substantially all represent forbearances related to COVID-19.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES





ADDITIONAL INFORMATION - RESERVES and CLAIMS PAID




















2021


2020


Year-to-date


Q3


Q2


Q1


Q4


Q3


2021


2020

Reserves (millions)














Primary Direct Loss Reserves

$

926



$

928



$

905



$

871



$

831






Pool Direct loss reserves

7



7



7



8



8






Other Gross Reserves



1



1



2



1






Total Gross Loss Reserves

$

933



$

936



$

913



$

881



$

840




















Primary Average Direct
Reserve Per Delinquency

$

24,597



$

21,147



$

17,147



$

15,100



$

12,907




















Net Paid Claims (millions) (1)

$

20



$

14



$

15



$

18



$

18



$

49



$

96


Total primary (excluding settlements)

11



11



12



12



15



34



86


Rescission and NPL settlements

7











7




Pool







1







1


Reinsurance

(1)





(1)



(1)





(2)



(3)


Other

3



3



4



6



3



10



12
















Primary Average Claim Payment
(thousands)

$

36.1


(2)

$

34.1



$

36.7



$

40.4



$

40.6



$

35.6


(2)

$

44.5


Flow only

$

32.0


(2)

$

34.8



$

32.3



$

31.2



$

37.2



$

33.1


(2)

$

39.0


















(1)

Net paid claims, as presented, does not include amounts received in conjunction with terminations or commutations of reinsurance agreements.

(2)

Excludes amounts paid in settlement disputes for claims paying practices and/or commutations of policies.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES





ADDITIONAL INFORMATION - REINSURANCE




















2021


2020


Year-to-date


Q3


Q2


Q1


Q4


Q3


2021


2020

Quota Share Reinsurance














% NIW subject to reinsurance

85.0

%


81.6

%


73.7

%


74.9

%


76.0

%


80.0

%


74.2

%

Ceded premiums written and earned (millions)

$

22.9



$

34.0



$

33.4



$

36.2



$

43.5



$

90.3



$

131.7


Ceded losses incurred (millions)

$

(3.6)



$

8.9



$

8.4



$

12.5



$

20.7



$

13.7



$

65.5


Ceding commissions (millions) (included in
underwriting and other expenses)

$

13.7



$

12.9



$

13.1



$

12.6



$

12.1



$

39.7



$

35.5


Profit commission (millions) (included in
ceded premiums)

$

45.1



$

31.0



$

31.9



$

26.6



$

17.1



$

108.0



$

45.9
















Excess-of-Loss Reinsurance














Ceded premiums earned (millions)

$

12.1



$

10.0



$

10.3



$

8.0



$

3.7



$

32.4



$

12.8


 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION: BULK STATISTICS AND MI RATIOS
















2021


2020


Year-to-date


Q3


Q2


Q1


Q4


Q3


2021


2020

Bulk Primary Insurance Statistics














Insurance in force (billions)

$4.4


$4.6


$4.8


$5.0


$5.1





Risk in force (billions)

$1.2


$1.3


$1.4


$1.4


$1.4





Average loan size (thousands)

$139.5


$140.4


$141.0


$141.5


$142.4





Number of delinquent loans

4,108


4,284


4,895


5,251


5,485





Delinquency rate

12.90%


12.99%


14.30%


14.92%


15.19%





Primary paid claims (excluding settlements)
(millions)

$3


$1


$4


$5


$4


$8


$27

Average claim payment (thousands)

$60.2


$29.8


$50.5


$79.0


$53.6


$46.6


$64.0















Mortgage Guaranty Insurance Corporation - Risk to
Capital

9.0:1

(1)

8.9:1


8.8:1


9.2:1


9.4:1





Combined Insurance Companies - Risk to Capital

9.0:1

(1)

8.9:1


8.8:1


9.1:1


9.4:1



















GAAP loss ratio (insurance operations only)

8.1%


11.6%


15.5%


17.5%


15.9%


11.8%


41.9%

GAAP underwriting expense ratio (insurance
operations only)

21.9%


22.3%


19.8%


19.4%


20.2%


21.3%


19.1%















(1)

Preliminary

 

Risk Factors

As used below, "we," "our" and "us" refer to MGIC Investment Corporation's consolidated operations or to MGIC Investment Corporation, as the context requires; and "MGIC" refers to Mortgage Guaranty Insurance Corporation.

Risk Factors Relating to the COVID-19 Pandemic

The COVID-19 pandemic may continue to materially impact our financial results and may also materially impact our business, liquidity and financial condition.

The COVID-19 pandemic had a material impact on our 2020 financial results. While uncertain, the future impact of the COVID-19 pandemic on the Company's business, financial results, liquidity and/or financial condition may also be material. The magnitude of the impact will be influenced by various factors, including the length and severity of the pandemic in the United States, efforts to reduce the transmission of COVID-19, the level of unemployment, and the impact of government initiatives and actions taken by Fannie Mae and Freddie Mac (the "GSEs") (including mortgage forbearance and modification programs) to mitigate the economic harm caused by COVID-19.

The COVID-19 pandemic may continue to impact our business in various ways, including the following, each of which is described in more detail in the remainder of these risk factors:

  • Our incurred losses will increase if the number of insured mortgages in our delinquency inventory increases. We establish reserves for insurance losses when delinquency notices are received on loans that are two or more payments past due and for loans we estimate are delinquent prior to the close of the accounting period but for which delinquency notices have not yet been reported to us (this is often referred to as "IBNR"). In addition, our current estimates of the number of delinquencies for which we will receive claims, and the amount, or severity, of each claim, may increase.
  • We may be required to maintain more capital under the private mortgage insurer eligibility requirements ("PMIERs") of the GSEs, which generally require more capital to be held for delinquent loans than for performing loans and require more capital to be held as the number of payments missed on delinquent loans increases.
  • If the number of delinquencies increases, the number of claims we must pay over time will generally increase.
  • Our access to the reinsurance and capital markets may be limited and the terms under which we are able to access such markets may be less attractive than the terms of our previous transactions.

Risk Factors Relating to the Mortgage Insurance Industry and its Regulation

Downturns in the domestic economy or declines in home prices may result in more homeowners defaulting and our losses increasing, with a corresponding decrease in our returns.

Losses result from events that reduce a borrower's ability or willingness to make mortgage payments, such as unemployment, health issues, family status, and whether the home of a borrower who defaults on a mortgage can be sold for an amount that will cover unpaid principal and interest and the expenses of the sale. A deterioration in economic conditions, including an increase in unemployment, generally increases the likelihood that borrowers will not have sufficient income to pay their mortgages and can also adversely affect home prices, which in turn can influence the willingness of borrowers with sufficient resources to make mortgage payments when the mortgage balance exceeds the value of the home. The seasonally-adjusted Purchase-Only U.S. Home Price Index of the Federal Housing Finance Agency (the "FHFA"), which is based on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac, indicates that home prices increased by 12.3% in the first eight months of 2021, after increasing by 11.5%, 5.4%, 5.7% and 6.3% in 2020, 2019, 2018 and 2017, respectively. The price-to-income ratio in some markets exceeds its historical average, in part as a result of recent home price appreciation outpacing increases in income. Home prices may decline even absent a deterioration in economic conditions due to declines in demand for homes, which in turn may result from changes in buyers' perceptions of the potential for future appreciation, restrictions on and the cost of mortgage credit due to more stringent underwriting standards, higher interest rates, changes to the tax deductibility of mortgage interest, decreases in the rate of household formations, or other factors.

The unemployment rate rose from 3.5% as of December 31, 2019, to 14.7% as of April 30, 2020. It was 4.8% as of September 30, 2021. High levels of unemployment may result in an increasing number of loans in our delinquency inventory and an increasing number of insurance claims; however, the increases are difficult to predict given the uncertainty in the current market environment, including uncertainty about the length and severity of the COVID-19 pandemic; efforts to reduce the transmission of COVID-19; effects of forbearance programs enacted by the GSEs, various states and municipalities; and effects of past and future government stimulus programs.

Forbearance for federally-insured mortgages (including those delivered to or purchased by the GSEs) allows for mortgage payments to be suspended for up to 18 months: an initial forbearance period of up to six months; if requested by the borrower following contact by the servicer, an extension of up to six months; and, for loans in a COVID-19 forbearance plan as of February 28, 2021, an additional extension of up to six months, subject to certain limits. In certain circumstances, the servicer will be unable to contact the borrower regarding an extension of the forbearance plan and it will expire without being extended, or further extended, as applicable. A delinquent loan for which the borrower was unable to be contacted and that is not in a forbearance plan may be more likely to result in a claim than a delinquent loan in a forbearance plan.

Historically, forbearance plans have reduced the incidence of our losses on affected loans. However, given the uncertainty surrounding the long-term economic impact of COVID-19, it is difficult to predict the ultimate effect of COVID-19 related forbearances on our loss incidence. At September 30, 2021, 17,793 of the loans in our delinquency inventory were reported to us as in forbearance. Of the 46,684 loans in our delinquency inventory as of June 30, 2020 that were reported to us as in forbearance, 78.4% are no longer in the default inventory as of September 30, 2021; 14.1% are still in the delinquency inventory and reported to us as in forbearance; and 7.6% are still in the delinquency inventory but no longer reported to us as in forbearance. As of September 30, 2021, 61% of the loans in forbearance have reached the twelve-month anniversary of their forbearance plans, 11% have reached the nine-month anniversary of their forbearance plans, and 10% have reached the six-month anniversary of their forbearance plans.  Whether a loan delinquency will cure, including through modification, when forbearance ends will depend on the economic circumstances of the borrower at that time. The GSEs have introduced specific loan workout options for borrowers whose COVID-19 forbearance plans end. If a servicer is unable to contact a borrower to determine a loan workout option, the forbearance plan will end and the loan may remain delinquent. The severity of losses associated with delinquencies that do not cure will depend on economic conditions at that time, including home prices.

Foreclosures on mortgages purchased or securitized by the GSEs were suspended through July 31, 2021. Under a CFPB rule that is generally effective through December 31, 2021, with limited exceptions, servicers must ensure that at least one temporary procedural safeguard has been met before referring 120-day delinquent loans for foreclosure.

We may not continue to meet the GSEs' private mortgage insurer eligibility requirements and our returns may decrease if we are required to maintain more capital in order to maintain our eligibility.

We must comply with a GSE's PMIERs to be eligible to insure loans delivered to or purchased by that GSE. The PMIERs include financial requirements, as well as business, quality control and certain transaction approval requirements. The financial requirements of the PMIERs require a mortgage insurer's "Available Assets" (generally only the most liquid assets of an insurer) to equal or exceed its "Minimum Required Assets" (which are generally based on an insurer's book of risk in force and calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance agreements).

Based on our interpretation of the PMIERs, as of September 30, 2021, MGIC's Available Assets totaled $5.8 billion, or $2.6 billion in excess of its Minimum Required Assets. MGIC is in compliance with the PMIERs and eligible to insure loans purchased by the GSEs. Our "Minimum Required Assets" reflect a credit for risk ceded under our reinsurance transactions, which are discussed in our risk factor titled "The mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring." The calculated credit for excess of loss reinsurance transactions under PMIERs is generally based on the PMIERs requirement of the covered loans and the attachment and detachment points of the coverage, all of which fluctuate over time. PMIERs credit is generally not given for the reinsured risk above the PMIERs requirement. The GSEs have discretion to further limit reinsurance credit under the PMIERs. Refer to our Quarterly Supplements, which are posted on our investor website, for the calculated PMIERs credit for each of our excess of loss reinsurance transactions. We are not including the information contained in those Supplements or on our investor website as a part of, or incorporating it by reference into, this Report. There is a risk we will not receive our current level of credit in future periods for ceded risk. In addition, we may not receive the same level of credit under future reinsurance transactions that we receive under existing transactions. If MGIC is not allowed certain levels of credit under the PMIERs, under certain circumstances, MGIC may terminate the reinsurance transactions without penalty.

The PMIERs generally require us to hold significantly more Minimum Required Assets for delinquent loans than for performing loans and the Minimum Required Assets required to be held increases as the number of payments missed on a delinquent loan increases. For delinquent loans whose initial missed payment occurred on or after March 1, 2020 and prior to April 1, 2021 (the "COVID-19 Crisis Period"), the Minimum Required Assets are generally reduced by 70% for at least three months. The 70% reduction will continue, or be newly applied, for delinquent loans that are subject to a forbearance plan that is granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by Freddie Mac or Fannie Mae. Loans considered to be subject to a forbearance plan include those that are in a repayment plan or loan modification trial period following the forbearance plan. As noted above, if a servicer of a loan is unable to contact the borrower prior to the expiration of the first 180-day forbearance plan term, or if the forbearance plan reaches its twelve-month anniversary and is not further extended, the forbearance plan generally will expire. In such case, the 70% reduction in Minimum Required Assets for that loan will no longer be applicable, our Minimum Required Assets will increase and our excess of Available Assets over Minimum Required Assets will decrease. As of September 30, 2021, application of the 70% reduction decreased our Minimum Required Assets from approximately $3.5 billion to approximately $3.2 billion. We do not expect our Minimum Required Assets for the loans in forbearance to increase by the full amount of the reduction upon expiration of the forbearance plans because we expect some loans whose forbearance plans expire to have their delinquencies cured through modification or otherwise.

Despite reducing the Minimum Required Assets for certain delinquent loans by 70%, if the number of loan delinquencies caused by the COVID-19 pandemic increases, it may cause our Minimum Required Assets to exceed our Available Assets. As of September 30, 2021, there were 37,379 loans in our delinquency inventory, of which 48% were reported to us as being subject to a forbearance plan. We believe substantially all of the reported forbearance plans are COVID-19-related. We are unable to predict the ultimate number of loans that will become delinquent as a result of the COVID-19 pandemic.

If our Available Assets fall below our Minimum Required Assets, we would not be in compliance with the PMIERs. The PMIERs provide a list of remediation actions for a mortgage insurer's non-compliance, with additional actions possible in the GSEs' discretion. At the extreme, the GSEs may suspend or terminate our eligibility to insure loans purchased by them. Such suspension or termination would significantly reduce the volume of our new insurance written ("NIW"); the substantial majority of which is for loans delivered to or purchased by the GSEs. In addition to the increase in Minimum Required Assets associated with delinquent loans, factors that may negatively impact MGIC's ability to continue to comply with the financial requirements of the PMIERs include the following:

  • The GSEs may make the PMIERs more onerous in the future. The PMIERs provide that the factors that determine Minimum Required Assets will be updated periodically, or as needed if there is a significant change in macroeconomic conditions or loan performance. We do not anticipate that the regular periodic updates will occur more frequently than once every two years. The PMIERs state that the GSEs will provide notice 180 days prior to the effective date of updates to the factors; however, the GSEs may amend the PMIERs at any time, including by imposing restrictions specific to our company.
  • There may be future implications for PMIERs as a result of changes to the regulatory capital requirements for the GSEs. In 2020, the FHFA adopted a rule containing a capital framework for the GSEs that would have increased their capital requirements, including through a decrease in credit received for credit risk transfer "CRT" transactions, effective on the later of (i) the date of termination of the FHFA's conservatorship of the applicable GSE; (ii) sixty days after publication of the adopted rule in the Federal Register; or (iii) any later compliance date provided in a consent order or other transition order applicable to a GSE. In September 2021, the FHFA issued a notice of proposed rule-making that would modify that capital framework, making it more likely that a risk-based capital requirement would be the binding constraint, instead of a leverage-based capital requirement, and increasing the credit for CRT transactions. When the final GSE capital requirements have been determined and become effective, they may affect the Minimum Required Assets required to be held by mortgage insurers, including through a change in credit received for mortgage insurers' reinsurance transactions and they may affect the volume of CRT transactions entered into by the GSEs.
  • Our future operating results may be negatively impacted by the matters discussed in the rest of these risk factors. Such matters could decrease our revenues, increase our losses or require the use of assets, thereby creating a shortfall in Available Assets.

Should capital be needed by MGIC in the future, capital contributions from our holding company may not be available due to competing demands on holding company resources, including for repayment of debt.

Because we establish loss reserves only upon a loan delinquency rather than based on estimates of our ultimate losses on risk in force, losses may have a disproportionate adverse effect on our earnings in certain periods.

In accordance with accounting principles generally accepted in the United States, we establish case reserves for insurance losses and loss adjustment expenses only when delinquency notices are received for insured loans that are two or more payments past due and for loans we estimate are delinquent but for which delinquency notices have not yet been received (this is often referred to as "IBNR"). Losses that may occur from loans that are not delinquent are not reflected in our financial statements, except in the case where a premium deficiency exists. A premium deficiency would be recorded if the present value of expected future losses and expenses exceeds the present value of expected future premiums and already established loss reserves on the applicable loans. As a result, future losses on loans that are not currently delinquent may have a material impact on future results as such losses emerge. As of September 30, 2021, we had established case reserves and reported losses incurred for 37,379 loans in our delinquency inventory and our IBNR reserve totaled $28 million. The number of loans in our delinquency inventory may increase from that level as a result of the COVID-19 pandemic, and our losses incurred may increase. The impact of the COVID-19 pandemic on the number of delinquencies and our losses incurred will be influenced by various factors, including those discussed in our risk factor titled "The COVID-19 pandemic may continue to materially impact our financial results and may also materially impact our business, liquidity and financial condition."

Because loss reserve estimates are subject to uncertainties, paid claims may be substantially different than our loss reserves.

When we establish case reserves, we estimate our ultimate loss on delinquent loans by estimating the number of such loans that will result in a claim payment (the "claim rate"), and further estimating the amount of the claim payment (the "claim severity"). Our estimates incorporate anticipated cures, loss mitigation activity, rescissions and curtailments. The establishment of loss reserves is subject to inherent uncertainty and requires judgment by management. Our actual claim payments may be substantially different than our loss reserve estimates. Our estimates could be affected by several factors, including a change in regional or national economic conditions, the impact of past and future government initiatives and actions taken by the GSEs to mitigate the economic harm caused by the COVID-19 pandemic (including foreclosure moratoriums and mortgage forbearance and modification programs) and efforts to reduce the transmission of COVID-19, and a change in the length of time loans are delinquent before claims are received.  All else being equal, the longer a loan is delinquent before a claim is received, the greater the severity. In light of the uncertainty caused by the COVID-19 pandemic, including the impact of foreclosure moratoriums and forbearance programs, the average time it takes to receive a claim may increase. The change in economic conditions may include changes in unemployment, including prolonged unemployment as a result of the COVID-19 pandemic, which may affect the ability of borrowers to make mortgage payments, and changes in home prices, which may affect the willingness of borrowers to make mortgage payments when the value of the home is below the mortgage balance. The economic effects of the COVID-19 pandemic may be disproportionately concentrated in certain geographic regions. Information about the geographic dispersion of our insurance in force can be found in our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q. Changes to our claim rate and claim severity estimates could have a material impact on our future results, even in a stable economic environment. Losses incurred generally have followed a seasonal trend in which the second half of the year has weaker credit performance than the first half, with higher new default notice activity and a lower cure rate; however, the effects of the COVID-19 pandemic affected this pattern in 2020 when new delinquency notice activity was higher in the second quarter of the year.

The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance.

Alternatives to private mortgage insurance include:

  • investors using risk mitigation and credit risk transfer techniques other than private mortgage insurance, or accepting credit risk without credit enhancement,
  • lenders and other investors holding mortgages in portfolio and self-insuring,
  • lenders using Federal Housing Administration ("FHA"), U.S. Department of Veterans Affairs ("VA") and other government mortgage insurance programs, and
  • lenders originating mortgages using piggyback structures to avoid private mortgage insurance, such as a first mortgage with an 80% loan-to-value ("LTV") ratio and a second mortgage with a 10%, 15% or 20% LTV ratio rather than a first mortgage with a 90%, 95% or 100% LTV ratio that has private mortgage insurance.

The GSEs' charters generally require credit enhancement for a low down payment mortgage loan (a loan in an amount that exceeds 80% of a home's value) in order for such loan to be eligible for purchase by the GSEs. Private mortgage insurance generally has been purchased by lenders in primary mortgage market transactions to satisfy this credit enhancement requirement. In 2018, the GSEs initiated secondary mortgage market programs with loan level mortgage default coverage provided by various (re)insurers that are not mortgage insurers governed by PMIERs, and that are not selected by the lenders. These programs, which currently account for a small percentage of the low down payment market, compete with traditional private mortgage insurance and, due to differences in policy terms, they may offer premium rates that are below prevalent single premium lender-paid mortgage insurance ("LPMI") rates. We participate in these programs from time to time. See our risk factor titled "Changes in the business practices of the GSEs, federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses" for a discussion of various business practices of the GSEs that may be changed, including through expansion or modification of these programs.

The GSEs (and other investors) have also used other forms of credit enhancement that did not involve traditional private mortgage insurance, such as engaging in credit-linked note transactions executed in the capital markets, or using other forms of debt issuances or securitizations that transfer credit risk directly to other investors, including competitors and an affiliate of MGIC; using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage; or accepting credit risk without credit enhancement.

The FHA's share of the low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance was 23.8% in the first half of 2021, 23.4% in 2020 and 28.2% in 2019. Beginning in 2012, the FHA's share has been as low as 23.4% (in 2020) and as high as 42.1% (in 2012). Factors that influence the FHA's market share include relative rates and fees, underwriting guidelines and loan limits of the FHA, VA, private mortgage insurers and the GSEs; lenders' perceptions of legal risks under FHA versus GSE programs; flexibility for the FHA to establish new products as a result of federal legislation and programs; returns expected to be obtained by lenders for Ginnie Mae securitization of FHA-insured loans compared to those obtained from selling loans to the GSEs for securitization; and differences in policy terms, such as the ability of a borrower to cancel insurance coverage under certain circumstances. The current Presidential Administration appears more likely than the last Administration to reduce the FHA's mortgage insurance premium rates. Such a rate reduction would negatively impact our NIW; however, given the many factors that influence the FHA's market share, it is difficult to predict the impact. In addition, we cannot predict how the factors that affect the FHA's share of new insurance written will change in the future.

The VA's share of the low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance was 32.0% in the first half of 2021, 30.9% in 2020 and 25.2% in 2019. Beginning in 2012, the VA's share has been as low as 22.8% (in 2013) and as high as 32.0% (in 2021). We believe that the VA's market share has generally been elevated in recent years because of an increase in the number of borrowers that are eligible for the VA's program, which offers 100% LTV ratio loans and charges a one-time funding fee that can be included in the loan amount, and because eligible borrowers have opted to use the VA program when refinancing their mortgages.

Changes in the business practices of the GSEs, federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses.

The substantial majority of our NIW is for loans purchased by the GSEs; therefore, the business practices of the GSEs greatly impact our business. The GSEs are required to submit Equitable Housing Finance Plans to the FHFA by the end of 2021. The plans are to identify and address barriers to sustainable housing opportunities, including the GSEs' goals and action plans to advance equity in housing finance for the next three years. The GSEs' action plans will likely change certain of the GSEs' business practices and those changes may affect the mortgage insurance industry. The GSEs' business practices that currently affect the mortgage insurance industry include:

  • The GSEs' PMIERs, the financial requirements of which are discussed in our risk factor titled "We may not continue to meet the GSEs' private mortgage insurer eligibility requirements and our returns may decrease if we are required to maintain more capital in order to m