MGIC INVESTMENT CORP

The following sections focus on the assets and liabilities experiencing major developments in 2025.

Investment Portfolio -Our investment portfolio primarily consists of a diverse mix of highly rated fixed income securities. The return we generate on our investment portfolio is an important component of our consolidated financial results. The investment portfolio is designed to achieve the following objectives:

(1)Primarily MGIC

To achieve our portfolio objectives, our asset allocation considers the risk and return parameters of the various asset classes in which we invest. This asset allocation is informed by, and based on, the following factors:

The average duration and embedded investment yield of our investment portfolio as of December 31, 2025 and 2024 is shown in the following table.

(1)Embedded investment yield is calculated on a yield-to-worst basis.

The credit risk of a security is evaluated through analysis of the security's underlying fundamentals, including the issuer's sector, scale, profitability, debt coverage, and ratings. Our investment policy guidelines limit the amount of our credit exposure to any one issue, issuer and type of instrument. The following table shows the security ratings of our fixed income investments as of December 31, 2025 and 2024.

(1)Ratings are provided by one or more of: Moody's, Standard & Poor's and Fitch Ratings. If three ratings are available, the middle rating is used, otherwise the lowest rating is used.

Our investment portfolio was invested in comparable security types for the years ended December 31, 2025 and December 31, 2024. See Note 5 – “Investments” to our consolidated financial statements for additional disclosure on our investment portfolio.

Investments Outlook

The Federal Open Market Committee ("FOMC") reduced the federal funds rate three times in 2025, taking the rate from 4.50% to 3.75%. The FOMC held the federal funds rate at 3.75% in January, as it aims to support the labor market while being committed to returning inflation to its long-run target of 2.00%. The lagged effects of the FOMC’s actions and other ongoing macroeconomic and geopolitical factors could create economic uncertainty and alter forward rate expectations, which may result in interest rate and credit spread volatility. Market volatility resulting from these factors, particularly the absolute level of rates and the rate of change, will continue to impact our investment valuations and returns.

The changes in unrealized investment gains and losses generally do not alter the management of our investment portfolio. We seek to manage our exposure to interest rate risk and volatility by maintaining a diverse mix of securities with an intermediate duration profile and generally hold fixed income investments until maturity. The quality of our fixed income portfolio remains very high and changes in unrealized gains and losses have little impact on our cash flows, statutory surplus, or other capital requirements.

Cash and Cash Equivalents -Cash and cash equivalents increased to $369.0 million as of December 31, 2025 (2024: $229.5 million), as net cash generated from operating and investing activities was only partially offset by cash used in financing activities.

Deferred Income Taxes -Our net deferred tax asset was $18.5 million as of December 31, 2025 (2024: $69.9 million). The change to our deferred tax asset during 2025 was primarily due to the change in the fair market value of our investment portfolio and our accelerated deduction of research and experimental costs allowable under 2025 tax legislation. We owned $984.2 million and $968.2 million of tax and loss bonds at December 31, 2025 and December 31, 2024, respectively. See Note 16 – “Income Taxes” to our consolidated financial statements for additional disclosure on the components of our deferred tax assets and liabilities.

Loss Reserves and Reinsurance Recoverable on Loss Reserves -Our loss reserves include estimates of losses and settlement expenses on (1) loans in our delinquency inventory (known as case reserves), (2) IBNR delinquencies, and (3) LAE. Our gross loss reserves are reduced by reinsurance recoverable on loss reserves to calculate a net reserve balance. Loss reserves increased to $474.9 million as of December 31, 2025, from $462.7 million of December 31, 2024. Reinsurance recoverables on loss reserves were $65.1 million and $47.3 million as of December 31, 2025 and December 31, 2024, respectively. Reinsurance recoverable is impacted by the mix of delinquencies covered by our QSR Transactions. The increase in our loss reserves was primarily driven by loss reserves established on new delinquency notices, offset partially by favorable development on previously received delinquencies. See Note 8 -"Loss Reserves" to our consolidated financial statements for additional information on the composition of our loss reserves.

Unearned Premium -Our unearned premium decreased to $93.0 million as of December 31, 2025 from $120.4 million as of December 31, 2024 primarily due to the run-off of unearned premium on our existing portfolio of single premium policies, partially offset by new premium written on single premium policies.

Federal tax credit payable - We have purchased transferable federal tax credits from third parties. The increase to the federal tax credit payable in 2025 is primarily due to amounts owed to third parties for purchased credits.

Shareholders' Equity -The decrease in shareholders' equity primarily relates to the repurchases of our common stock and dividends paid to shareholders, partially offset by net income for the year ended December 31, 2025.