MGIC Investment Corporation Reports Fourth Quarter 2023 Results
Fourth Quarter 2023 Net Income of $184.5 million or $0.66 per Diluted Share
Fourth Quarter 2023 Adjusted Net Operating Income (Non-GAAP) of $187.6 million or $0.67 per Diluted Share
Full Year 2023 Net Income of $712.9 million or $2.49 per Diluted Share
Full Year 2023 Adjusted Net Operating Income (Non-GAAP) of $724.4 million or $2.53 per Diluted Share
MILWAUKEE, Jan. 31, 2024 /PRNewswire/ -- MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the fourth quarter of 2023 and the full year of 2023.
Tim Mattke, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC") said, "The fourth quarter capped another successful year. In 2023, we again delivered excellent financial results, and returned meaningful capital to our shareholders. During the year, we remained committed to delivering long-term value for our shareholders, disciplined in our approach to the market, and focused on through-the-cycle performance. We enter 2024 with financial strength and capital flexibility, and we are excited for the opportunities that the new year will bring."
SUMMARY FINANCIAL METRICS | Quarter ended | ||
($ in millions, except where otherwise noted) | Q4 2023 | Q3 2023 | Q4 2022 |
New insurance written (NIW) (billions) | $10.9 | $14.6 | $12.9 |
Net premiums earned | $226.4 | $241.3 | $244.1 |
Annual persistency | 86.1 % | 86.3 % | 82.2 % |
Insurance in force (billions) | $293.5 | $294.3 | $295.3 |
Losses incurred, net | $(9.5) | $(0.1) | $(31.1) |
Primary delinquency inventory | 25,650 | 24,720 | 26,387 |
Primary IIF delinquency rate | 2.25 % | 2.14 % | 2.17 % |
Loss ratio | (4.2 %) | (0.0 %) | (12.8 %) |
Underwriting expense ratio | 24.6 % | 22.2 % | 31.3 % |
Net premium yield (bps) | 30.8 | 32.9 | 33.1 |
In force portfolio yield (bps) | 38.6 | 38.6 | 38.9 |
Annualized return on equity | 15.2 % | 15.1 % | 16.9 % |
Book value per common share outstanding | $18.61 | $17.37 | $15.82 |
Adjust for AOCI | $1.16 | $1.78 | $1.64 |
Tangible book value per share | $19.77 | $19.15 | $17.46 |
CAPITAL AND LIQUIDITY | As of | ||
($ in billions, except where otherwise noted) | December 31, 2023 | September 30, 2023 | December 31, 2022 |
PMIERs available assets | $5.8 | $6.0 | $5.7 |
PMIERs excess | $2.4 | $2.4 | $2.3 |
Holding company liquidity (millions) | $918 | $723 | $647 |
FOURTH QUARTER 2023 HIGHLIGHTS
- We paid a dividend of $0.115 per common share to shareholders during the fourth quarter of 2023.
- We repurchased 7.0 million shares of common stock at an average cost of $17.57 per share.
- MGIC paid a $300 million dividend to our holding company.
- We executed several reinsurance transactions, as previously announced, to align with our strategy to reinsure our most recent or future NIW and recapture risk on attractive seasoned vintages:
- We executed a $330 million excess of loss reinsurance agreement (executed through an insurance linked notes transaction) that covers the vast majority of policies issued June 1, 2022 through August 31, 2023.
- We executed a 30% quota share transaction with a group of unaffiliated reinsurers covering most of our new insurance written in 2024.
- We terminated our 2020 quota share reinsurance transaction effective December 31, 2023 and incurred termination fees of $5 million.
- Home Re 2019-1 Ltd., Home Re 2021-1 Ltd., and Home Re 2021-2 Ltd conducted tender offers for certain tranches of the mortgage insurance-linked notes that supported the reinsurance agreement with MGIC. In aggregate, $384.9 million of outstanding notes were purchased. The reinsurance coverage corresponding to the tendered notes was terminated. MGIC incurred $8 million of additional ceded premium in the fourth quarter associated with the cost of the tender premiums and associated expense.
- We appointed Michael Thompson to our Board of Directors.
FIRST QUARTER 2024 HIGHLIGHTS
- Through January 26, 2024, we repurchased an additional 1.8 million shares of our common stock at an average cost of $19.40 per share.
- We declared a dividend of $0.115 per common share to shareholders payable on March 5, 2024, to shareholders of record at the close of business on February 15, 2024.
- In January, S&P upgraded MGIC's financial strength and credit rating to A- and at the same time upgraded the credit rating on MGIC Investment to BBB-. The outlook for the ratings is stable.
Conference Call and Webcast Details
MGIC Investment Corporation will hold a conference call February 1, 2024, at 10 a.m. ET to allow securities analysts and shareholders the opportunity to hear management discuss the company's quarterly results. Individuals interested in joining by telephone should register for the call at https://register.vevent.com/register/BI7798780415c145638bcc06b0b9aa7bbd to receive the dial-in number and unique PIN to access the call. It is recommended that you join the call at least 10 minutes before the conference call begins. The call is also being webcast and can be accessed at the company's website at http://mtg.mgic.com/ under "Newsroom." A replay of the webcast will be available on the company's website through March 1, 2024.
About MGIC
Mortgage Guaranty Insurance Corporation (MGIC) (www.mgic.com), the principal subsidiary of MGIC Investment Corporation, serves lenders throughout the United States, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality through the use of private mortgage insurance. At December 31, 2023, MGIC had $293.5 billion of primary insurance in force covering 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. 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 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 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) | 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 December 31, | Twelve Months Ended December 31, | |||||||
(In thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||
Net premiums written | $ 219,134 | $ 231,439 | $ 915,041 | $ 960,732 | ||||
Revenues | ||||||||
Net premiums earned | $ 226,448 | $ 244,085 | $ 952,551 | $ 1,007,133 | ||||
Net investment income | 57,802 | 46,360 | 214,740 | 167,476 | ||||
Net gains (losses) on investments and other financial instruments | (761) | 1,313 | (14,141) | (7,463) | ||||
Other revenue | 468 | 496 | 1,952 | 5,639 | ||||
Total revenues | 283,957 | 292,254 | 1,155,102 | 1,172,785 | ||||
Losses and expenses | ||||||||
Losses incurred, net | (9,534) | (31,139) | (20,856) | (254,565) | ||||
Underwriting and other expenses, net | 54,744 | 73,506 | 236,824 | 249,063 | ||||
Loss on debt extinguishment | — | 69 | — | 40,199 | ||||
Interest expense | 8,900 | 9,381 | 36,905 | 48,054 | ||||
Total losses and expenses | 54,110 | 51,817 | 252,873 | 82,751 | ||||
Income before tax | 229,847 | 240,437 | 902,229 | 1,090,034 | ||||
Provision for income taxes | 45,343 | 48,994 | 189,280 | 224,685 | ||||
Net income | $ 184,504 | $ 191,443 | $ 712,949 | $ 865,349 | ||||
Net income per diluted share | $ 0.66 | $ 0.64 | $ 2.49 | $ 2.79 | ||||
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES | ||||||||
EARNINGS PER SHARE (UNAUDITED) | ||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
(In thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||
Net income | $ 184,504 | $ 191,443 | $ 712,949 | $ 865,349 | ||||
Interest expense, net of tax: | ||||||||
9% Convertible Junior Subordinated Debentures due 2063 | — | 378 | 1,026 | 3,228 | ||||
Diluted net income available to common shareholders | $ 184,504 | $ 191,821 | $ 713,975 | $ 868,577 | ||||
Weighted average shares - basic | 275,955 | 296,206 | 283,605 | 305,847 | ||||
Effect of dilutive securities: | ||||||||
Unvested restricted stock units | 2,991 | 2,123 | 2,427 | 1,917 | ||||
9% Convertible Junior Subordinated Debentures due 2063 | — | 1,625 | 1,123 | 3,465 | ||||
Weighted average shares - diluted | 278,946 | 299,954 | 287,155 | 311,229 | ||||
Net income per diluted share | $ 0.66 | $ 0.64 | $ 2.49 | $ 2.79 | ||||
NON-GAAP RECONCILIATIONS | |||||||||||||
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income | |||||||||||||
Three Months Ended December 31, | |||||||||||||
2023 | 2022 | ||||||||||||
(In thousands, except per share amounts) | Pre-tax | Tax Effect | Net | Pre-tax | Tax Effect | Net (after-tax) | |||||||
Income before tax / Net income | $ 229,847 | $ 45,343 | $ 184,504 | $ 240,437 | $ 48,994 | $ 191,443 | |||||||
Adjustments: | |||||||||||||
Loss on debt extinguishment | — | — | — | 69 |
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