MGIC INVESTMENT CORP

D. Reinsurance Agreements

We have in place quota share reinsurance ("QSR") and excess of loss reinsurance ("XOL") transactions providing various amounts of coverage on our risk in force as of December 31, 2025. These transactions allow us to better manage our risk profile by reducing the amount of capital we are required to hold to comply with insurance regulatory requirements and the requirements of the GSEs' PMIERs. Our reinsurance strategy focuses on reinsuring our most recent or future NIW, while recapturing risk on attractive seasoned vintages.

Quota Share Transactions

Our QSR Transactions are with unaffiliated reinsurers. As of December 31, 2025, our QSR Transactions cover most of our insurance written from 2021 through 2025. The weighted average coverage percentage of our QSR Transactions was 32.9%, based on risk in force as of December 31, 2025.

At December 31, 2025 and 2024, approximately 73.8% and 68.2%, respectively, of our IIF was subject to QSR Transactions. In 2025 and 2024, approximately 87.2% and 86.9%, respectively, of our NIW was subject to QSR Transactions.

The structure of the QSR Transactions is a quota share of various percentages of the policies covered, with a ceding commission and a profit commission. The profit commission under our QSR Transactions varies inversely with the level of ceded losses incurred on a “dollar for dollar” basis and can be eliminated at ceded loss levels higher than what we have experienced on our QSR Transactions.

Excess of Loss Transactions

We have XOL Transactions with a panel of unaffiliated reinsurers executed through the traditional reinsurance market (“Traditional XOL") and with unaffiliated special purpose insurers (“Home Re") transactions. Our Home Re Transactions issued notes linked to the reinsurance coverage ("Insurance Linked Notes" or "ILNs"). 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.

For the reinsurance coverage periods, we retain the first layer of the respective aggregate losses, and the reinsurers will then provide second layer coverage up to the outstanding reinsurance coverage amount. We retain losses in excess of the outstanding reinsurance coverage amount. The aggregate XOL reinsurance coverage decreases over a period of either 10 or 12.5 years, depending on the transaction, subject to certain conditions, as the underlying covered mortgages amortize or are repaid, or mortgage insurance losses are paid.

The Home Re Entities financed the coverages with the proceeds of the ILNs in an aggregate amount equal to the initial reinsurance coverage amounts. Each ILN is non-recourse to any of our assets. The proceeds of the ILNs, which were deposited into reinsurance trusts for our benefit, will be the source of reinsurance claim payments to us and principal repayments on the ILNs.

Although reinsuring against possible loan losses does not discharge us from liability to a policyholder, it reduces the amount of capital we are required to retain against potential future losses for PMIERs, rating agency and insurance regulatory purposes. The calculated credit for XOL reinsurance transactions under PMIERs is generally based on the PMIERs requirement of the covered loans and the attachment and detachment point of the coverage, all of which fluctuate over time. PMIERs credit is haircut for the un-collateralized portion of the reinsured risk and is generally not given for the reinsured risk above the PMIERs requirement. The GSEs have discretion to further limit reinsurance credit under the PMIERs. The total credit for risk ceded under our reinsurance transactions is subject to periodic review by the GSEs.

For further information about our reinsurance agreements, including the Company's early termination rights, see Note 7 – “Reinsurance,” to our consolidated financial statements in Item 8, and our risk factor titled"Reinsurance may be unavailable at current levels and prices, and/or the GSEs may reduce the amount of capital credit we receive for our reinsurance transactions" in Item 1A.

E. Investment Portfolio

Policy and Strategy

As of December 31, 2025, the fair value of our investment portfolio was approximately $5.8 billion. In addition, as of December 31, 2025, our total assets included approximately $369 million of cash and cash equivalents. As of December 31, 2025, approximately $1.1 billion of investments and cash and cash equivalents was held by our parent company, and the remainder was held by our subsidiaries, primarily MGIC.

As of December 31, 2025, approximately 93% of our investment portfolio (excluding cash and cash equivalents) was managed by two external investment managers, although we maintain overall control of investment policy and strategy. We maintain direct management of the remainder of our investment portfolio. Unless otherwise indicated, the remainder of the discussion regarding our investment portfolio refers to our investment portfolio only and not to cash and cash equivalents.

Our management is responsible for the execution of our investment strategy and compliance with the adopted investment policies, and review of investment performance and strategy with the Securities Investment Committee of the Board of Directors on a quarterly basis.

Our current strategy for the investment portfolio emphasizes the following: preservation of PMIERs assets, limiting portfolio volatility, maximizing total return with an emphasis on yield, and providing sufficient liquidity with minimal realized losses to meet expected and unexpected obligations. Consequently, our investment portfolio consists almost entirely of high-quality, investment grade, fixed income securities. Our investment portfolio strategy considers tax efficiency. The mix of tax-exempt municipal securities in our investment portfolio will be dependent upon their value, relative to taxable equivalent securities, determined in part by federal statutory tax rates. Our investment policies and strategies are subject to change depending upon regulatory, economic and market conditions and our existing or anticipated financial condition and operating requirements.

For information about the credit ratings of securities in our investment portfolio, see"Balance Sheet Review" in Item 7.

Investment Operations

As of December 31, 2025, the sectors represented in our investment portfolio were as shown in the table below:

We have no derivative financial instruments in our investment portfolio. Securities with stated maturities due within up to one year, after one year and up to five years, after five years and up to ten years, and after ten years, represented 13%, 28%, 28%, and 15%, respectively, of the total fair value of our fixed income investment securities. Asset-backed and mortgage-backed securities are not included in these maturity categories as most mortgage and asset-backed securities are not due at a single maturity date. Asset-backed securities represent 10% of the investment portfolio (CLOs represent 2%, CMBS represent 4% and other asset-backed securities represent 4%). Our pre-tax yield was 4.0%, 4.0%, and 3.7% for 2025, 2024, and 2023, respectively, and our after-tax yield was 3.2%, 3.2%, and 3.0% for 2025, 2024, and 2023, respectively.

Our ten largest holdings at December 31, 2025 appear in the table below:

Note: This table excludes securities issued by the U.S. government or U.S. government agencies.

For further information concerning investment operations, see Note 5 – “Investments,” to our consolidated financial statements in Item 8.