MGIC INVESTMENT CORP

Consolidated Results of Operations

The following section of the MD&A provides a comparative discussion of our Consolidated Results of Operations for the two-year period ended December 31, 2025. For a discussion of the Critical Accounting Estimates used by us that affect the Consolidated Results of Operations, see"Critical Accounting Estimates" below.

Summary Results of Operations

(1)See"Explanation and Reconciliation of our use of Non-GAAP Financial Measures."

Net income for 2025 was $738.3 million (2024: $763.0 million) and diluted income per share was $3.14 (2024: $2.89). The decrease in net income is primarily due to an increase in losses incurred, net, partially offset by a decrease in underwriting and other expenses, net, and a decrease in the provision for income taxes. Diluted income per share increased primarily due to a decrease in the number of diluted weighted shares outstanding partially offset by a decrease in net income.

Adjusted net operating income for 2025 was $738.4 million (2024: $768.5 million) and adjusted net operating income per diluted share was $3.14 (2024: $2.91). The decrease in adjusted net operating income in 2025 compared to 2024 is primarily reflects a decrease in net income. The increase in adjusted net operating income per diluted share primarily reflects a decrease in the number of diluted weighted shares outstanding partially offset by a decrease in adjusted net operating income.

Revenues

Net Premiums Earned

Premium yield

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 2025 and 2024.

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

(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 in 2025 and 0.5 bps in 2024.

The key drivers of our net premium yield are listed below:

As discussed in our risk factor titled "Competition or changes in our relationships with our customers could reduce our revenues, reduce our premium yields and/or increase our losses," the private mortgage insurance industry is highly competitive and premium rates have declined over the past several years. We expect our in force portfolio premium yield will remain relatively flat in 2026 driven by sustained high credit quality and an elevated Annual Persistency.

See "Overview – Factors Affecting Our Results" above for additional factors that also influence the amount of net premiums written and earned in a year.

Reinsurance Transactions

Quota Share Reinsurance

Our quota share reinsurance affects various lines of our statements of operations and therefore we believe it should be analyzed by reviewing its total effect on our pre-tax income, described as follows.

•We cede a fixed percentage of premiums earned and received on insurance covered by the transactions.

•We receive the benefit of a profit commission through a reduction in the premiums we cede. The profit commission varies inversely with the level of losses incurred on a "dollar for dollar" basis and can be eliminated at loss levels higher than what we have experienced on the QSR Transactions. As a result, lower levels of ceded losses incurred result in less benefit from ceded losses incurred, and a higher profit commission; higher levels of ceded losses incurred result in more benefit from ceded losses incurred and a lower profit commission (or for certain levels of accident year loss ratios, its elimination).

•We receive the benefit of a ceding commission through a reduction in underwriting expenses equal to 20% of premiums ceded (before the effect of the profit commission).

•We cede a fixed percentage of losses incurred on insurance covered by the transactions.

The following table provides information related to our QSR Transactions for 2025 and 2024.

The increase in profit commission in 2025 was primarily due to an increase in premiums ceded under our QSR Transactions, offset by an increase in losses incurred. Ceded losses incurred are impacted by the delinquencies covered by our QSR Transactions, our estimates of payments that will be ultimately made on those delinquencies, and claim payments covered by our QSR Transactions.

We executed two 40% QSR Transactions with groups of unaffiliated reinsurers covering eligible NIW in 2026 and NIW in 2027. Additionally, we amended the terms on our 2022 quota share reinsurance transaction with certain participants from the existing reinsurance panel. The quota share cede rate decreased from 30% to 28%, effective December 31, 2025.

Covered Risk

The percentages of our NIW, new risk written, IIF, and RIF subject to our QSR Transactions as shown in the following table will vary from period to period in part due to the mix of our risk written during the period and the number of active QSR Transactions.

Excess of Loss Reinsurance

We have XOL Transactions with panels of unaffiliated reinsurers executed through the traditional reinsurance market (“Traditional XOL Transactions”) and with unaffiliated special purpose insurers (“Home Re Transactions”). For policies covered by our XOL Transactions, we retain the first layer of the aggregate losses paid, and the reinsurers will then provide second layer coverage up to the outstanding reinsurance coverage amount. We retain losses paid in excess of the outstanding reinsurance coverage amount. The reinsurance coverage is subject to adjustment based on the risk characteristics of the covered loans until the initial excess of loss reinsurance coverage layer has been finalized. Our XOL Transactions provide reinsurance coverage for a portion of the risk associated with certain mortgage insurance policies having insurance coverage in force dates from January 1, 2020 through December 31, 2025.

The calculated credit for XOL Transactions under PMIERs is generally based on the PMIERs requirement of the covered loans and the attachment and detachment point of the coverage. PMIERs credit is haircut for the uncollateralized portion of the reinsured risk and is generally not given for the reinsured risk above the PMIERs requirement. The current attachment, current detachment, and PMIERs required asset credit for each of our XOL Transactions as of December 31, 2025, are as follows:

(1) The percentage represents the cumulative losses as a percentage of adjusted risk in force that MGIC retains prior to the XOL taking losses.

(2) The percentage represents the cumulative losses as a percentage of adjusted risk in force that must be reached before MGIC begins absorbing losses after the XOL layer.

In 2025, we executed an XOL Transaction which will provide up to $184 million of reinsurance coverage on NIW in 2026.

In January 2026, through an insurance linked note transaction, we executed a $324 million excess of loss reinsurance agreement that covers certain policies written between January 1, 2022 and March 31, 2025.

Ceded premiums on our XOL Transactions were $61.1 million and $66.6 million for the years ended December 31, 2025 and 2024, respectively.

See Note 7 - "Reinsurance," to our consolidated financial statements for additional discussion of our XOL Transactions.

Net investment income increased 1% to $246.3 million in 2025 compared to $244.6 million in 2024. See"Balance Sheet Review" in this MD&A for further discussion regarding our investment portfolio.

Losses and Expenses

Losses Incurred, Net

As discussed in“Critical Accounting Estimates” below and consistent with industry practices, we establish case loss reserves for future claims on delinquent loans that were reported to us as two payments past due and have not become current or resulted in a claim payment. Such loans are referred to as being in our delinquency inventory. Case loss reserves are established based on estimating the number of loans in our delinquency inventory that will result in a claim payment, which is referred to as the claim rate, and further estimating the amount of the claim payment, which is referred to as claim severity.

IBNR reserves are established for estimated losses from delinquencies we estimate have occurred prior to the close of an accounting period, but have not yet been reported to us. IBNR reserves are also established using estimated claim rates and claim severities.

Estimation of losses is inherently judgmental. The conditions that affect the claim rate and claim severity include the current and future state of the domestic economy, including unemployment and the current and future strength of local housing markets; exposure on insured loans; the amount of time between delinquency and claim filing (all else being equal, the longer the period between delinquency and claim filing, the greater the severity); the effectiveness of loss mitigation efforts; and curtailments and rescissions. The actual amount of the claim payments may be substantially different than our loss reserve estimates.

Our estimates could be adversely affected by several factors, including a deterioration of regional or national economic conditions, including unemployment, which may reduce borrowers' income and their ability to make mortgage payments. Additionally, the impact of past and future government initiatives and actions taken by the GSEs to keep borrowers in their homes may impact our estimates. A decline in housing values may affect borrowers' willingness to continue to make mortgage payments when the value of the home is below the mortgage balance. Loss reserves in future periods will also be dependent on the number of loans reported to us as delinquent. Changes in our estimates arising from the factors described above or due to other unforeseen circumstances could materially affect our financial results, even in a stable economic environment.

Generally, losses follow a seasonal trend in which the second half of the year has weaker credit performance than the first half, with higher new notice activity and a lower cure rate. The state of the economy, local housing markets, pandemics, natural disasters, and various other factors, may result in delinquencies not following the typical pattern.

For information on how pandemics and natural disasters could affect losses incurred, net see our risk factors titled “The effects of pandemics, severe weather events, or other disasters may adversely impact our results of operations and financial condition." As discussed in our risk factor titled“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” if we have not received a notice of delinquency with respect to a loan and if we have not estimated the loan to be delinquent as of December 31, 2025, through our IBNR reserve, then we have not yet recorded an incurred loss with respect to that loan.

The following table details the financial impact of the significant components of losses incurred for the periods indicated.

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.

See "New notice activity" and "Claims severity" below for additional factors and trends that impact these loss reserve assumptions

Delinquency Inventory

A roll-forward of our primary delinquency inventory for the years ended December 31, 2025 and 2024 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.

New Notice Activity

The table below presents our new notices received, delinquency inventory, and the average number of missed payments for the loans in our delinquency inventory by policy year:

Claims Severity

Factors that impact claim severity include:

As discussed in Note 8 - "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. In recent years, 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. 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 their increase is uncertain.

The majority of loans insured prior to 2014 (which represent 24% 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.

See Note 8 – “Loss Reserves” to our consolidated financial statements and “Critical Accounting Estimates” below for a discussion of our losses incurred and claims paying practices (including curtailments).

The table below shows the number of consecutive months a borrower is delinquent. Historically as a delinquency ages it is more likely to result in a claim.

(1)Approximately 22% and 27% of the delinquency inventory that has been delinquent for 12 consecutive months or more has been delinquent for at least 36 consecutive months as of December 31, 2025 and 2024, respectively.

The length of time a loan is in the delinquency inventory can differ from the number of payments that the borrower has not made or is considered delinquent. These differences typically result from a borrower making monthly payments that do not result in the loan becoming fully current. Generally, a defaulted loan with more missed payments is more likely to result in a claim. The number of payments that a borrower is delinquent is shown in the following table.

(1)Approximately 16% and 25% of the loans in the delinquency inventory with 12 payments or more delinquent have at least 36 payments delinquent as of December 31, 2025, and 2024, respectively.

Net Losses and LAE Paid

Net losses and LAE paid increased $12 million in 2025 when compared with 2024, primarily driven by an increase in average claim paid. 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. Home price appreciation and pre-claim third-party sales have mitigated net losses and LAE in recent years; however, the positive impact of both factors has moderated relative to prior years We expect net losses and LAE paid to increase; however, the magnitude and timing of their increase is uncertain.

The following table presents our net losses and LAE paid in 2025 and 2024.

(1)See Note 7 - "Reinsurance" for additional information on our reinsurance terminations

The gross loss reserves as of December 31, 2025, and 2024 appear in the table below.

The primary delinquency inventory for the top 15 jurisdictions (based on December 31, 2025 delinquency inventory) at December 31, 2025 and 2024 appears in table the below.

The primary average RIF on delinquent loans as of December 31, 2025 and 2024 for the top 5 jurisdictions (based on December 31, 2025 delinquency inventory) appears in the following table.

The primary average RIF on all loans was $72,995 and $70,475 at December 31, 2025 and December 31, 2024, respectively. The increase is primarily due to an increase in the average loan balances in recent years.

The primary delinquency inventory by policy year at December 31, 2025 and 2024 appears in the following table.

Generally, on our primary business, the third and fourth year after loan origination have been periods with the highest level of new delinquency notices. Factors such as Annual Persistency and deteriorating economic conditions can impact the level and frequency of new notices we receive during a given period. As of December 31, 2025, 44% of our primary RIF was written subsequent to December 31, 2022, 61% of our primary RIF was written subsequent to December 31, 2021, and 80% of our primary RIF was written subsequent to December 31, 2020.

Underwriting and Other Expenses, Net

Underwriting and other expenses includes items such as employee compensation costs, outside service expenses, premium taxes, and depreciation and maintenance expense, and are reported net of ceding commissions.

Underwriting and other expenses, net for 2025 decreased to $200.6 million from $218.3 million in 2024. The decrease was primarily due to a decrease in employee costs. See Note 14. - "Segment Reporting" to our consolidated financial statements for a discussion around significant segment expenses.

The underwriting expense ratio is the ratio, expressed as a percentage, of the underwriting and operating expenses, net and amortization of DAC to net premiums written. The underwriting expense ratio decreased in 2025 compared with 2024 due to a decrease in underwriting and operating expenses, net, and an increase in net premiums written.

Income Tax Expense and Effective Tax Rate

Our provision for income taxes for 2025 decreased to $190.2 million from $205.7 million in 2024 primarily due to a decrease in income before tax and a benefit recognized for the purchase of transferable federal tax credits. Our effective tax rate for 2025 and 2024 approximated the federal statutory income tax rate of 21%. See Note 16 – “Income Taxes” to our consolidated financial statements for a discussion of our tax position.