MGIC INVESTMENT CORP

Previous wording

The following is management’s discussion and analysis of the financial condition and results of operations of MGIC Investment Corporation for the first quarter of 2024. As used below, “we” and “our” refer to MGIC Investment Corporation’s consolidated operations. This form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023. See the“Glossary of terms and acronyms” for definitions and descriptions of terms used throughout this MD&A. Our revenues and losses could be affected by the Risk Factors referred to under “Forward Looking Statements and Risk Factors” below, and they are an integral part of the MD&A.

Current wording

The following is management’s discussion and analysis of the financial condition and results of operations of MGIC Investment Corporation for the second quarter of 2024. As used below, “we” and “our” refer to MGIC Investment Corporation’s consolidated operations. This form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023. See the“Glossary of terms and acronyms” for definitions and descriptions of terms used throughout this MD&A. Our revenues and losses could be affected by the Risk Factors referred to under “Forward Looking Statements and Risk Factors” below, and they are an integral part of the MD&A.

Previous wording

Adjusted net operating income for the first quarter 2024 was $178.4 million (Q1 2023: $157.8 million) and adjusted net operating income per diluted share was $0.65 (Q1 2023: $0.54). The increase in adjusted net operating income primarily reflects an increase in net income. The increase in adjusted net operating income per diluted share primarily reflects an increase in adjusted net operating income and a decrease in the number of diluted weighted shares outstanding.

Current wording

Adjusted net operating income for the second quarter 2024 was $204.9 million (Q2 2023: $196.0 million) and adjusted net operating income per diluted share was $0.77 (Q2 2023: $0.68). The increase in adjusted net operating income primarily reflects an increase in net income. The increase in adjusted net operating income per diluted share primarily reflects an increase in adjusted net operating income and a decrease in the number of diluted weighted shares outstanding.

Previous wording

Net investment income in the three months ended March 31, 2024, was $59.7 million, compared with $49.2 million, in the prior year. The increase in net investment income was due to an increase of 58 basis points in the average investment yields.

Current wording

Net investment income in the three months ended June 30, 2024, was $61.5 million, compared with $52.3 million, in the prior year. The increase in net investment income was due to an increase of 52 basis points in the average investment yields.

Previous wording

The increase in our provision for income taxes in the first quarter of 2024 as compared to the same period in the prior year was primarily due to an increase in income before tax.

Current wording

The increase in our provision for income taxes in the second quarter of 2024 as compared to the same period in the prior year was primarily due to an increase in income before tax.

Previous wording

We recorded first quarter 2024 net income of $174.1 million, or $0.64 per diluted share. Net income increased by $19.6 million from net income of $154.5 million, or $0.53 per diluted share, in the prior year. The increase is primarily due a decrease in other underwriting and operating expenses, net, and an increase in investment income, net of expenses. This was offset partially by an increase in provision for income taxes. Diluted income per share increased primarily due to an increase in net income and a decrease in the number of diluted weighted shares outstanding.

Current wording

We recorded net income of $378.3 million, or $1.40 per diluted share. Net income increased by $32.7 million from net income of $345.6 million, or $1.19 per diluted share in the prior year. The increase is primarily due to an increase in investment income, net of expenses, and a decrease in other underwriting and operating expenses, net. This was partially offset by an increase in provision for income taxes. Diluted income per share increased primarily due to an increase in net income and a decrease in the number of diluted weighted shares outstanding.

Previous wording

Underwriting and other expenses, net in the first quarter of 2024 were $59.0 million, compared with $70.1 million for the same period last year. The decrease in underwriting and other expenses, net during the three months ended March 31, 2024 was primarily due to a decrease in pension expenses and a decrease in expenses related to professional and consulting services. Pension expenses were higher for the three months ended March 31, 2023 due to settlement accounting charges.

Current wording

Underwriting and other expenses, net in the six months ended June 30, 2024 were $111.7 million, compared with $124.1 million for the same period last year. The decrease in underwriting and other expenses, net during the six months ended June 30, 2024 was primarily due to a decrease in pension expenses and a decrease in expenses related to professional and consulting services. Pension expenses were higher for the six months ended June 30, 2023 due to settlement accounting charges.

Previous wording

The ability of MGIC to pay dividends is restricted by insurance regulation. Amounts in excess of prescribed limits are deemed “extraordinary” and may not be paid if disapproved by the OCI. A dividend is extraordinary when the proposed dividend amount, plus dividends paid in the twelve months preceding the dividend payment date exceed the ordinary dividend level. In 2024, MGIC can pay $64 million of ordinary dividends without OCI approval, before taking into consideration dividends paid in the preceding twelve months. In the three months ended March 31, 2024, and 2023, we did not make dividends payments to the holding company. Future dividend payments to the holding company will continue to be determined in consultation with the board and after considering any updated estimates about our business. In April 2024, MGIC paid a $350 million dividend to our holding company.

Current wording

The ability of MGIC to pay dividends is restricted by insurance regulation. Amounts in excess of prescribed limits are deemed “extraordinary” and may not be paid if disapproved by the OCI. A dividend is extraordinary when the proposed dividend amount, plus dividends paid in the twelve months preceding the dividend payment date exceed the ordinary dividend level. In 2024, MGIC can pay $64 million of ordinary dividends without OCI approval, before taking into consideration dividends paid in the preceding twelve months. In the six months ended June 30, 2024, and 2023, we made dividend payments to the holding company of $350 million and $300 million respectively. Future dividend payments to the holding company will continue to be determined in consultation with the board and after considering any updated estimates about our business, subject to regulatory approval.

Previous wording

Repurchases may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. In the three months ended March 31, 2024, and for the full year of 2023, we repurchased 4.7 million and 21.7 million shares of common stock, using approximately $93.3 million and $340.6 million of holding company resources, respectively. As of March 31, 2024, we had $170 million of authorization remaining to repurchase our common stock through July 1, 2025 under a $500 million share repurchase program approved by our Board of Directors in April, 2023. As of March 31, 2024, we had approximately 269 million shares of common stock outstanding. In April 2024, our Board of Directors approved an additional share repurchase program, authorizing us to repurchase up to $750 million of common stock prior to December 31, 2026.

Current wording

Repurchases may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. In the six months ended June 30, 2024, and for the full year of 2023, we repurchased 12.3 million and 21.7 million shares of common stock, using approximately $250.3 million and $340.6 million of holding company resources, respectively. As of June 30, 2024, we had $773.4 million of available authorization under our existing share repurchase programs. Under our April 2023 repurchase program, we have $23.4 million in remaining authorization through July 1, 2025. Under our April 2024 repurchase program we may repurchase an additional $750 million of common stock prior to December 31, 2026. As of June 30, 2024, we had approximately 261 million shares of common stock outstanding.

Previous wording

In the first quarter of 2024, we paid quarterly cash dividends of $0.115 per share which totaled $31.7 million. On April 25, 2023, the Board of Directors declared a quarterly cash dividend to the holders of the company’s common stock of $0.115 per share to shareholders of record on May 9, 2024.

Current wording

In the first and second quarters of 2024, we paid quarterly cash dividends of $0.115 per share which totaled $63.3 million. On July 25, 2024, the Board of Directors declared a quarterly cash dividend to the holders of the company’s common stock of $0.13 per share to shareholders of record on August 8, 2024.

Previous wording

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 based on an insurer's book of risk in force, calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance transactions, and subject to a floor amount). Based on our interpretation of the PMIERs as of March 31, 2024, MGIC’s Available Assets totaled $5.9 billion, or $2.5 billion in excess of its Minimum Required Assets.

Current wording

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 based on an insurer's book of risk in force, calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance transactions, and subject to a floor amount). Based on our interpretation of the PMIERs as of June 30, 2024, MGIC’s Available Assets totaled $5.8 billion, or $2.4 billion in excess of its Minimum Required Assets.

Previous wording

Our reinsurance transactions enable us to earn higher returns on our Minimum Required Assets than we must hold under PMIERs. However, reinsurance may not always be available to us, or available only on terms, or costs, that we find unacceptable.

Current wording

Our reinsurance transactions enable us to earn higher returns on our Minimum Required Assets than we would without them because they generally reduce the Minimum Required Assets we must hold under PMIERs. However, reinsurance may not always be available to us, or available only on terms, or costs, that we find unacceptable.

Previous wording

At March 31, 2024, MGIC’s risk-to-capital ratio was 9.8 to 1, below the maximum allowed by the jurisdictions with State Capital Requirements, and its policyholder position was $3.8 billion above the required MPP of $2.2 billion. The calculation of our risk-to-capital ratio and MPP reflect full credit for the risk ceded under our reinsurance transactions. It is possible that under the revised State Capital Requirements discussed below, MGIC will not be allowed full credit for the risk ceded under such transactions. If MGIC is not allowed an agreed level of credit under either the State Capital Requirements or the PMIERs, MGIC may terminate the reinsurance transactions, without penalty.

Current wording

At June 30, 2024, MGIC’s risk-to-capital ratio was 10.0 to 1, below the maximum allowed by the jurisdictions with State Capital Requirements, and its policyholder position was $3.6 billion above the required MPP of $2.2 billion. The calculation of our risk-to-capital ratio and MPP reflect full credit for the risk ceded under our reinsurance transactions. It is possible that under the revised State Capital Requirements discussed below, MGIC will not be allowed full credit for the risk ceded under such transactions. If MGIC is not allowed an agreed level of credit under either the State Capital Requirements or the PMIERs, MGIC may terminate the reinsurance transactions, without penalty.

Previous wording

The NAIC established a Mortgage Guaranty Insurance Working Group to determine and make recommendations to the NAIC’s Financial Condition Committee as to what, if any, changes to make to the solvency and other regulations relating to mortgage guaranty insurers. A draft of a revised Mortgage Guaranty Insurance Model Act was adopted by the Financial Condition Committee in July 2023 and by the Executive Committee and Plenary NAIC in August 2023. The revised Model Act includes requirements relating to, among other things: (i) capital and minimum capital requirements, and contingency reserves; (ii) restrictions on mortgage insurers’ investments in notes secured by mortgages; (iii) prudent underwriting standards and formal underwriting guidelines; (iv) the establishment of formal, internal “Mortgage Guaranty Quality Control Programs” with respect to in-force business; and (v) reinsurance and prohibitions on captive reinsurance arrangements. It is uncertain when the revised Model Act will be adopted in any jurisdiction. The provisions of the Model Act, if adopted in their final form, are not expected to have a material adverse effect on our business. It is unknown whether any changes will be made by state legislatures prior to adoption, and the effect changes, if any, will have on the mortgage guaranty insurance market generally, or on our business. At this time, we expect MGIC to continue to comply with the current State Capital Requirements; however, refer to our risk factor titled “State capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis” for more information about matters that could negatively impact our compliance with State Capital Requirements.

Current wording

The NAIC established a Mortgage Guaranty Insurance Working Group to determine and make recommendations to the NAIC’s Financial Condition Committee as to what, if any, changes to make to the solvency and other regulations relating to mortgage guaranty insurers. A draft of a revised Mortgage Guaranty Insurance Model Act was adopted by the Financial Condition Committee in July 2023 and by the Executive Committee and Plenary NAIC in August 2023. The revised Model Act includes requirements relating to, among other things: (i) capital and minimum capital requirements, and contingency reserves; (ii) restrictions on mortgage insurers’ investments in notes secured by mortgages; (iii) prudent underwriting standards and formal underwriting guidelines; (iv) the establishment of formal, internal “Mortgage Guaranty Quality Control Programs” with respect to in-force business; and (v) reinsurance and prohibitions on captive reinsurance arrangements. It is uncertain when the revised Model Act will be adopted in any jurisdiction. The provisions of the Model Act, if adopted in their final form, are not expected to have a material adverse effect on our business. It is unknown whether any changes will be made by state legislatures prior to adoption, and the effect changes, if any, will have on the mortgage guaranty insurance market generally, or on our business. Wisconsin, where MGIC is domiciled, has begun the process to replace current MI regulations with the Model Act, though it is expected that some changes will be made before final adoption.

Previous wording

Our current and future business, results of operations and financial condition are impacted by macroeconomic conditions, such as rising interest rates, home prices, housing demand, level of employment, inflation, pandemics, restrictions and costs on mortgage credit, and other factors. For additional information on how our business may be impacted see our Risk Factor titled “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.”

Current wording

Our current and future business, results of operations and financial condition are impacted by macroeconomic conditions, such as interest rates, home prices, housing demand, level of employment, inflation, pandemics, restrictions and costs on mortgage credit, and other factors. For additional information on how our business may be impacted see our Risk Factor titled “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.”

Previous wording

•Equity securities. Investment gains and losses are accounted for as a function of the periodic change in fair value

Current wording

•Equity securities. Investment gains and losses reflect the periodic change in fair value.

Previous wording

In general, the majority of any underwriting profit that a book generates occurs in the early years of the book, with the largest portion of any underwriting profit realized in the first year following the year the book was written. Subsequent years of a book may result in either underwriting profit or underwriting losses. This pattern of results typically occurs because relatively few of the incurred losses on delinquencies that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments) and increasing losses. The typical pattern is also a function of premium rates generally resetting to lower levels after ten years. The state of the economy, local housing markets and various other factors may result in delinquencies not following the typical pattern.

Current wording

In general, the majority of any underwriting profit that a book generates occurs in the early years of the book, with the largest portion of any underwriting profit realized in the first year following the year the book was written. Subsequent years of a book may result in either underwriting profit or underwriting losses. This pattern of results typically occurs because relatively few of the incurred losses on delinquencies that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments) and increasing losses. The state of the economy, local housing markets and various other factors may result in delinquencies not following the typical pattern.

Previous wording

NIW for the first quarter of 2024 was $9.1 billion (Q1 2023: $8.2 billion). The increase reflects a higher expected market position in the current year compared with the same period in the prior year. For the remainder of the year, we expect our 2024 NIW to be slightly higher than 2023.

Current wording

NIW for the second quarter of 2024 was $13.5 billion (Q2 2023: $12.4 billion) and $22.6 billion for the six months ended June 30, 2024 (YTD June 30, 2023: $20.6 billion). The increase reflects a higher expected market position in the current year compared with the same period in the prior year. For the full year, we expect our 2024 NIW to be slightly higher than 2023.

Previous wording

The following tables present characteristics of our primary NIW for the three months ended March 31, 2024 and 2023.

Current wording

The following tables present characteristics of our primary NIW for the three and six months ended June 30, 2024 and 2023.

Previous wording

Our annual persistency was 85.7% at March 31, 2024 compared to 86.1% at December 31, 2023 and 84.5% at March 31, 2023. Since 2018, our annual persistency ranged from a high of 86.3% at September 30, 2023 to a low of 60.7% at March 31, 2021. Our persistency rate is primarily affected by the level of current mortgage interest rates compared to the mortgage coupon rates on our IIF, which affects the vulnerability of the IIF to refinancing; and the current amount of equity that borrowers have in the homes underlying our IIF.

Current wording

Our annual persistency was 85.4% at June 30, 2024 compared to 86.1% at December 31, 2023 and 85.9% at June 30, 2023. Since 2018, our annual persistency ranged from a high of 86.3% at September 30, 2023 to a low of 60.7% at March 31, 2021. Our persistency rate is primarily affected by the level of current mortgage interest rates compared to the mortgage coupon rates on our IIF, which affects the vulnerability of the IIF to refinancing; and the current amount of equity that borrowers have in the homes underlying our IIF.

Previous wording

Our 2009 and later books possess significantly improved risk characteristics when compared to our 2005-2008 books. Modification and refinance programs, such as HAMP and HARP, which expired at the end of 2016 and 2018, respectively, but have been replaced by other GSE modification programs, make outstanding loans more affordable to borrowers with the goal of reducing the number of foreclosures. As of March 31, 2024, loans associated with modification programs accounted for 3.5% of our total RIF, compared to 3.6% at December 31, 2023. Loans associated with 88.1% of all our modifications were current as of March 31, 2024.

Current wording

Our 2009 and later books possess significantly improved risk characteristics when compared to our 2005-2008 books. Modification and refinance programs, such as HAMP and HARP, which expired at the end of 2016 and 2018, respectively, but have been replaced by other GSE modification programs, make outstanding loans more affordable to borrowers with the goal of reducing the number of foreclosures. As of June 30, 2024, loans associated with modification programs accounted for 3.4% of our total RIF, compared to 3.6% at December 31, 2023. Loans associated with 88.3% of all our modifications were current as of June 30, 2024.

Previous wording

MGIC has written no new pool insurance since 2008; however, for a variety of reasons, including responding to capital market alternatives to PMI and customer demands, MGIC may write pool risk in the future. Our direct pool risk in force was $236 million ($180 million on pool policies with aggregate loss limits and $56 million on pool policies without aggregate loss limits) at March 31, 2024 compared to $256 million ($186 million on pool policies with aggregate loss limits and $70 million on pool policies without aggregate loss limits) at December 31, 2023. If claim payments associated with a specific pool reach the aggregate loss limit, the remaining IIF within the pool would be cancelled and any remaining delinquencies under the pool would be removed from our delinquency inventory.

Current wording

MGIC has written no new pool insurance since 2008; however, for a variety of reasons, including responding to capital market alternatives to PMI and customer demands, MGIC may write pool risk in the future. Our direct pool risk in force was $233 million ($179 million on pool policies with aggregate loss limits and $54 million on pool policies without aggregate loss limits) at June 30, 2024 compared to $256 million ($186 million on pool policies with aggregate loss limits and $70 million on pool policies without aggregate loss limits) at December 31, 2023. If claim payments associated with a specific pool reach the aggregate loss limit, the remaining IIF within the pool would be cancelled and any remaining delinquencies under the pool would be removed from our delinquency inventory.

Previous wording

In connection with the GSEs' CRT programs, an insurance subsidiary of MGIC provides insurance and reinsurance covering portions of the credit risk related to certain reference pools of mortgages acquired by the GSEs. Our RIF, as reported to us, related to these programs was approximately $358 million and $310 million as of March 31, 2024 and December 31, 2023, respectively.

Current wording

In connection with the GSEs' CRT programs, an insurance subsidiary of MGIC provides insurance and reinsurance covering portions of the credit risk related to certain reference pools of mortgages acquired by the GSEs. Our RIF, as reported to us, related to these programs was approximately $389 million and $310 million as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

The following section of the MD&A provides a comparative discussion of MGIC Investment Corporation’s Consolidated Results of Operations for the three months ended March 31, 2024 and 2023.

Current wording

The following section of the MD&A provides a comparative discussion of MGIC Investment Corporation’s Consolidated Results of Operations for the three and six months ended June 30, 2024 and 2023.

Previous wording

Premiums earned for the three months ended March 31, 2024 were $242.6 million, compared with $242.0 million, for the same period last year. Net premiums written for three months ended March 31, 2024 were $233.8 million, compared with $230.2 million, for the same period last year.

Current wording

Premiums earned for the three and six months ended June 30, 2024 were $243.5 million and $486.2 million, respectively, compared with $242.8 million and $484.8 million, for the same periods last year. Net premiums written for three and six months ended June 30, 2024 were $233.5 million and $467.3 million, respectively, compared with $231.2 million and $461.4 million, respectively, for the same periods last year.

Previous wording

Net premium yield is net premiums earned divided by average IIF during the period. The following table presents the key drivers of our net premium yield for each of the three months ended March 31, 2024 and March 31, 2023.

Current wording

Net premium yield is net premiums earned divided by average IIF during the period. The following table presents the key drivers of our net premium yield for each of the three and six months ended June 30, 2024 and June 30, 2023.

Previous wording

(2) Assumed premiums include those from our participation in GSE CRT programs, of which the impact on the net premium yield was 0.5 bps for the three months ended March 31, 2024 compared to 0.4 bps for the three months ended March 31, 2023.

Current wording

(2) Assumed premiums include those from our participation in GSE CRT programs, of which the impact on the net premium yield was 0.5 bps for the six months ended June 30, 2024 compared to 0.4 bps for the six months ended June 30, 2023.

Previous wording

The following table provides information related to our QSR Transactions for each of the three months ended and as of March 31, 2024 and March 31, 2023.

Current wording

The following table provides information related to our QSR Transactions for each of the three and six months ended and as of June 30, 2024 and June 30, 2023.

Previous wording

The Home Re Transactions are executed through the issuance of insurance linked notes (“ILNs”). As of March 31, 2024 our Home Re Transactions provided $1.1 billion of loss coverage on a portfolio of policies having an in force date from July 1, 2016 through March 31, 2019, from August 1, 2020 through December 31, 2021, and from June 1, 2022 through August 31, 2023; all dates inclusive. For this reinsurance coverage, we retain the first layer of the respective aggregate losses paid, and a Home Re Entity will then provide second layer coverage up to the outstanding reinsurance amount.

Current wording

The Home Re Transactions are executed through the issuance of insurance linked notes (“ILNs”). As of June 30, 2024 our Home Re Transactions provided $1.0 billion of loss coverage on a portfolio of policies having an in force date from July 1, 2016 through March 31, 2019, from August 1, 2020 through December 31, 2021, and from June 1, 2022 through August 31, 2023; all dates inclusive. For this reinsurance coverage, we retain the first layer of the respective aggregate losses paid, and a Home Re Entity will then provide second layer coverage up to the outstanding reinsurance amount.

Previous wording

The current attachment, current detachment, and PMIERs required asset credit for each of our XOL Transactions as of March 31, 2024, are as follows.

Current wording

The current attachment, current detachment, and PMIERs required asset credit for each of our XOL Transactions, excluding the 2024 Traditional XOL which is still in its fill up period, as of June 30, 2024, are as follows.

Previous wording

Ceded premiums on our XOL Transactions were $16.1 million for the three months ended March 31, 2024, and $16.9 million for the three months ended March 31, 2023.

Current wording

Ceded premiums on our XOL Transactions were $16.6 million and $32.7 million, respectively, for the three and six months ended June 30, 2024, and $17.4 million and $34.4 million, respectively, for the three and six months ended June 30, 2023.

Previous wording

Net investment income in the three months ended March 31, 2024 was $59.7 million, compared with $49.2 million in the three months ended March 31, 2023. The increase in net investment income was primarily due to an increase of approximately 58 basis points in the average investment yields.

Current wording

Net investment income in the three months ended June 30, 2024 and 2023 was $61.5 million and $52.3 million, respectively. Net investment income for the six months ended June 30, 2024 and 2023, was $121.2 million and $101.6 million, respectively. The increase in net investment income was primarily due to an increase of approximately 52 and 55 basis points in the average investment yields three and six months ended June 30, 2024, respectively.

Previous wording

Losses incurred, net for the first quarter of 2024 were $4.6 million, a decrease of $1.9 million compared to the first quarter of 2023 losses incurred, net of $6.4 million. While new delinquency notices added approximately $53.4 million for the three months ended March 31, 2024, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of approximately $48.9 million. For the three months ended March 31, 2023, new delinquency notices added approximately $47.2 million, offset by our re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of approximately $40.8 million. The favorable development for both periods primarily resulted from a decrease in the expected claim rate on previously received delinquencies. Home price appreciation experienced in recent years has allowed some borrowers to cure their delinquencies through the sale of their property.

Current wording

Losses incurred, net for the second quarter of 2024 were $(18.3) million, a decrease of $0.6 million compared to the second quarter of 2023 losses incurred, net of $(17.7) million. While new delinquency notices added approximately $49.1 million for the three months ended June 30, 2024, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of approximately $(67.4) million. For the three months ended June 30, 2023, new delinquency notices added approximately $42.3 million, offset by our re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of approximately $(59.9) million. The favorable development for both periods primarily resulted from a decrease in the expected claim rate on previously received delinquencies. Home price appreciation experienced in recent years has allowed some borrowers to cure their delinquencies through the sale of their property.

Previous wording

The loss ratio is the ratio, expressed as a percentage, of the sum of losses incurred, net to net premiums earned. The loss ratio was 1.9% for the three months ended March 31, 2024, compared with 2.7% for the three months ended March 31, 2023. The decrease in the loss ratio for the three months ended March 31, 2024 compared to the prior year was primarily due to the decrease in losses incurred discussed above.

Current wording

The loss ratio is the ratio, expressed as a percentage, of the sum of losses incurred, net to net premiums earned. The loss ratio was (7.5)% and (2.8)% for the three and six months ended June 30, 2024, compared with (7.3)% and (2.3)% for the three and six months ended June 30, 2023.

Previous wording

A rollforward of our primary delinquency inventory for the three months ended March 31, 2024 and 2023 appears in the table below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers.

Current wording

A rollforward of our primary delinquency inventory for the three and six months ended June 30, 2024 and 2023 appears in the table below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers.

Previous wording

As discussed in Note 11 - “Loss Reserves,” our loss reserves estimates take into consideration trends over time, because the development of the delinquencies may vary from period to period without establishing a meaningful trend. An increase in third party property sales prior to claim settlement has resulted in a decrease in the average claim paid and the average claim paid as a percentage of exposure in recent years. With the onset of the COVID-19 pandemic, the level of claims received decreased. Claim activity and the average claims paid as a percentage of exposure has not yet returned to pre-COVID-19 levels. The magnitude and timing of the increases are uncertain.

Current wording

As discussed in Note 11 - “Loss Reserves,” our loss reserves estimates take into consideration trends over time, because the development of the delinquencies may vary from period to period without establishing a meaningful trend. An increase in third party property sales prior to claim settlement has resulted in a decrease in the average claim paid and the average claim paid as a percentage of exposure in recent years. We expect average claims paid as a percentage of exposure to increase as we receive delinquencies that have not experienced the same level of home price appreciation. The extent and timing of these increases are uncertain.

Previous wording

The majority of loans insured prior to 2014 (which represent 35% of the loans in the delinquency inventory) are covered by master policy terms that, except under certain circumstances, do not limit the number of years that an insured can include interest when filing a claim. Under our current master policy terms, an insured can include accumulated interest when filing a claim only for the first three years the loan is delinquent. In each case, the insured must comply with its obligations under the terms of the applicable master policy.

Current wording

The majority of loans insured prior to 2014 (which represent 34% of the loans in the delinquency inventory) are covered by master policy terms that, except under certain circumstances, do not limit the number of years that an insured can include interest when filing a claim. Under our current master policy terms, an insured can include accumulated interest when filing a claim only for the first three years the loan is delinquent. In each case, the insured must comply with its obligations under the terms of the applicable master policy.

Previous wording

(1)Approximately 35%, 37%, and 38% of the primary delinquency inventory delinquent for 12 consecutive months or more has been delinquent for at least 36 consecutive months as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

Current wording

(1)Approximately 31%, 37%, and 41% of the primary delinquency inventory delinquent for 12 consecutive months or more has been delinquent for at least 36 consecutive months as of June 30, 2024, December 31, 2023, and June 30, 2023, respectively.

Previous wording

(1)Approximately 32%, 34%, and 32% of the primary delinquency inventory with 12 payments or more delinquent has at least 36 payments delinquent as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

Current wording

(1)Approximately 30%, 34%, and 34% of the primary delinquency inventory with 12 payments or more delinquent has at least 36 payments delinquent as of June 30, 2024, December 31, 2023, and June 30, 2023, respectively.

Previous wording

Net losses and LAE paid in the three months ended March 31, 2024 were consistent with the same period in the prior year. The primary average claim paid can vary materially from period to period based upon a variety of factors, including the local market conditions, average loan amount, average coverage percentage, the amount of time between delinquency and claim filing, and our loss mitigation efforts on loans for which claims are paid.

Current wording

Net losses and LAE paid in the three and six months ended June 30, 2024 were consistent with the same periods in the prior year. The primary average claim paid can vary materially from period to period based upon a variety of factors, including the local market conditions, average loan amount, average coverage percentage, the amount of time between delinquency and claim filing, and our loss mitigation efforts on loans for which claims are paid.

Previous wording

The following table presents our net losses and LAE paid for the three months ended March 31, 2024 and 2023.

Current wording

The following table presents our net losses and LAE paid for the three and six months ended June 30, 2024 and 2023.