Overview of Q1 2025 Results

MGIC Investment Corporation reported strong financial results for the first quarter of 2025. The company recorded net income of $185.5 million, or $0.75 per diluted share, up 7% from $174.1 million, or $0.64 per diluted share, in the prior year period. The increase was primarily driven by higher net gains on investments and lower underwriting expenses, partially offset by an increase in losses incurred.

Adjusted net operating income, a non-GAAP measure, was $185.2 million ($0.75 per diluted share) compared to $178.4 million ($0.65 per diluted share) in Q1 2024. The increase reflects higher net income. Diluted earnings per share rose due to the increase in net income and a decrease in diluted weighted average shares outstanding.

Revenue and Profit Trends

Net premiums earned were $243.7 million, up slightly from $242.6 million in the prior year quarter. New insurance written (NIW) increased to $10.2 billion from $9.1 billion, reflecting a higher expected market position. The company’s annual persistency rate was 84.7% at March 31, 2025, down from 85.7% a year earlier.

Investment income, net of expenses, grew to $61.4 million from $59.7 million, driven by the size of the investment portfolio. Net gains on investments and other financial instruments were $0.7 million, compared to a $8.5 million loss in the prior year period.

Losses incurred, net increased to $9.6 million from $4.6 million, as new delinquency notices added $59.5 million, partially offset by $49.9 million of favorable reserve development on previously received delinquencies. The loss ratio rose to 3.9% from 1.9%.

Underwriting and other expenses, net declined to $51.4 million from $59.0 million, primarily due to lower employee costs. The underwriting expense ratio improved to 22.5% from 25.7%.

The provision for income taxes increased to $49.2 million from $45.8 million, in line with the increase in income before tax.

Strengths and Weaknesses

MGIC’s key strengths include:

• Strong profitability, with net income and adjusted net operating income both increasing year-over-year
• Solid investment portfolio, with high-quality fixed income securities and a conservative duration profile
• Effective reinsurance program, which reduces required capital and provides loss coverage
• Robust capital position, with MGIC’s PMIERs excess of $2.6 billion and a risk-to-capital ratio of 9.8:1

Potential weaknesses and risks include:

• Exposure to macroeconomic conditions that could impact mortgage delinquencies and claims
• Reliance on the GSEs, whose business practices and reform efforts could negatively affect MGIC
• Regulatory capital requirements that could constrain MGIC’s ability to write new business
• Cybersecurity threats that could disrupt operations and expose sensitive customer information

Outlook and Future Prospects

Looking ahead, MGIC expects its 2025 NIW to be higher than 2024 levels. The company’s in-force portfolio premium yield is expected to remain relatively flat compared to 2024, as higher persistency and continued strong credit quality of new business offset competitive pressures on premium rates.

MGIC’s capital position remains strong, with the company in compliance with PMIERs requirements and state capital regulations. The company has ample holding company liquidity to service debt, pay dividends, and repurchase shares. MGIC paid a $400 million dividend to the holding company in April 2025.

Potential headwinds include the uncertain impact of GSE reform efforts, the risk of an economic downturn affecting mortgage performance, and ongoing cybersecurity threats. However, MGIC’s diversified business model, prudent risk management, and strong market position suggest the company is well-positioned to navigate these challenges and continue delivering solid financial results.

Overall, MGIC’s Q1 2025 performance demonstrates the company’s ability to generate consistent profitability, maintain a robust capital base, and effectively manage risk. While the mortgage insurance industry faces various uncertainties, MGIC appears to be well-equipped to capitalize on opportunities and deliver long-term value for shareholders.