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What changed in MGIC INVESTMENT CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MGIC INVESTMENT CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+428 added−684 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in MGIC INVESTMENT CORP's 2023 10-K

428 paragraphs added · 684 removed · 336 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

131 edited+17 added−35 removed125 unchanged
Biggest changeInterest Rate Delinquency Rate % Cede Rate % % of Original Remaining Policy Year Total % of Total Total % of Total 2004 and prior $ 1,475 0.5 % $ 411 0.5 % 7.3 % 13.1 % — % N.M. 2005-2008 11,610 3.9 % 3,083 4.0 % 6.9 % 10.9 % — % 4.8 % 2009-2015 6,457 2.2 % 1,754 2.3 % 4.3 % 4.7 % — % 3.6 % 2016 6,527 2.2 % 1,749 2.3 % 3.9 % 3.2 % — % 13.6 % 2017 7,839 2.7 % 2,059 2.7 % 4.2 % 3.8 % — % 15.9 % 2018 8,106 2.7 % 2,081 2.8 % 4.8 % 4.4 % — % 16.2 % 2019 17,285 5.9 % 4,447 5.8 % 4.1 % 2.2 % 1.5 % 26.6 % 2020 64,659 21.9 % 16,204 21.2 % 3.2 % 1.0 % 28.7 % 56.6 % 2021 100,796 34.1 % 26,004 34.0 % 3.1 % 0.9 % 29.2 % 85.5 % 2022 70,545 23.9 % 18,680 24.4 % 4.8 % 0.4 % 30.4 % 96.4 % Total $ 295,298 100.0 % $ 76,472 100.0 % MGIC Investment Corporation 2022 Form 10-K | 13 MGIC Investment Corporation and Subsidiaries Product Characteristics.
Biggest changeInterest Rate Delinquency Rate % Cede Rate % % of Original Remaining IIF Policy Year Total % of Total Total % of Total 2004 and prior $ 1.2 0.4 % $ 0.3 0.4 % 7.4 % 12.7 % — % N.M. 2005-2008 $ 9.9 3.4 % $ 2.6 3.4 % 7.0 % 10.6 % — % 4.1 % 2009-2019 $ 35.6 12.1 % $ 9.4 12.1 % 4.3 % 3.5 % — % 9.1 % 2020 $ 50.8 17.3 % $ 13.2 17.2 % 3.2 % 1.2 % 5.0 % 44.4 % 2021 $ 86.5 29.5 % $ 22.8 29.6 % 3.1 % 1.4 % 29.7 % 73.4 % 2022 $ 66.3 22.6 % $ 17.6 22.8 % 4.9 % 1.2 % 30.5 % 89.3 % 2023 $ 43.3 14.7 % $ 11.2 14.5 % 6.6 % 0.2 % 26.5 % 96.0 % Total (1) $ 293.5 100.0 % $ 77.2 100.0 % (1) May not foot due to rounding MGIC Investment Corporation 2023 Form 10-K | 13 MGIC Investment Corporation and Subsidiaries Product Characteristics The following table reflects, at the dates and by the categories indicated, the total dollar amount of primary RIF and the percentage of that primary RIF, as determined on the basis of information available on the date of mortgage origination.
The GSEs (and other investors) have also used other forms of credit enhancement that did not involve traditional private mortgage insurance, such as engaging in credit-linked note transactions executed in the capital markets, or using other forms of debt issuances or securitizations that transfer credit risk directly to other investors, including competitors and an affiliate of MGIC; and using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage.
The GSEs (and other investors) have also used other forms of credit enhancement that did not involve traditional private mortgage insurance, such as engaging in credit-linked note transactions executed in the capital markets, and using other forms of debt issuances or securitizations that transfer credit risk directly to other investors, including competitors and an affiliate of MGIC; and using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage.
Primary coverage can be used on any type of residential mortgage loan instrument approved by the mortgage insurer. References in this document to amounts of insurance written or in force, risk written or in force, and other historical data related to our insurance refer only to direct (before giving effect to reinsurance) primary insurance, unless otherwise indicated.
Primary coverage can be used on any type of residential mortgage loan instrument approved by the mortgage insurer. References in this document to amounts of insurance written or in force, risk written or risk in force, and other historical data related to our insurance refer only to direct (before giving effect to reinsurance) primary insurance, unless otherwise indicated.
The Company maintains a Senior Management Oversight Committee (“SMOC”) that, at the management level, serves as its primary risk management governance organization.
Risk Governance The Company maintains a Senior Management Oversight Committee (“SMOC”) that, at the management level, serves as its primary risk management governance organization.
With regulatory approval, a mortgage insurance company may make early withdrawals from the contingency reserve when incurred losses exceed 35% of net premiums earned in a calendar year. Although MGIC holds assets in excess of its minimum statutory capital requirements and its PMIERs financial requirements, the ability of MGIC to pay dividends is restricted by insurance regulation.
With regulatory approval, a mortgage insurance company may make early withdrawals from the contingency reserve when incurred losses exceed 35% of premiums earned in a calendar year. Although MGIC holds assets in excess of its minimum statutory capital requirements and its PMIERs financial requirements, the ability of MGIC to pay dividends is restricted by insurance regulation.
Among the key objectives of the ERM framework are to have a clear and well documented shared understanding, by senior management and the Board, of the Company’s risk management philosophy and overall appetite for risk, and that there are appropriate monitoring, management and reporting mechanisms to support the framework. Risk Governance .
Among the key objectives of the ERM framework are to have a clear and well documented shared understanding, by senior management and the Board, of the Company’s risk management philosophy and overall appetite for risk, and that there are appropriate monitoring, management and reporting mechanisms to support the framework.
Primary delinquency rate by jurisdiction 2022 2021 2020 Florida * 3.1 % 3.7 % 7.5 % Texas 2.3 % 3.1 % 6.1 % Illinois * 2.6 % 3.4 % 5.9 % Pennsylvania * 2.2 % 2.5 % 4.0 % New York * 3.5 % 4.3 % 6.9 % California 2.2 % 3.2 % 6.1 % Ohio * 2.2 % 2.4 % 4.0 % Michigan 1.9 % 2.4 % 4.0 % Georgia 2.3 % 3.1 % 6.2 % New Jersey * 2.9 % 4.1 % 7.0 % North Carolina 1.7 % 2.3 % 4.2 % Maryland 2.4 % 3.3 % 6.0 % Indiana 2.3 % 2.8 % 4.4 % Virginia 1.4 % 1.9 % 4.2 % Minnesota 1.6 % 2.0 % 3.5 % All other jurisdictions 2.0 % 2.6 % 4.6 % Note: Asterisk denotes jurisdictions in the table above that predominately use a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed.
Primary delinquency rate by jurisdiction 2023 2022 2021 Florida * 2.8 % 3.1 % 3.7 % Texas 2.5 % 2.3 % 3.1 % Illinois * 2.7 % 2.6 % 3.4 % Pennsylvania * 2.1 % 2.2 % 2.5 % California 2.3 % 2.2 % 3.2 % New York * 3.4 % 3.5 % 4.3 % Ohio * 2.2 % 2.2 % 2.4 % Michigan 2.3 % 1.9 % 2.4 % Georgia 2.5 % 2.3 % 3.1 % New Jersey * 2.6 % 2.9 % 4.1 % North Carolina 1.7 % 1.7 % 2.3 % Maryland 2.3 % 2.4 % 3.3 % Indiana * 2.5 % 2.3 % 2.8 % Minnesota 1.6 % 1.6 % 2.0 % Virginia 1.4 % 1.4 % 1.9 % All other jurisdictions 2.0 % 2.0 % 2.6 % Note: Asterisk denotes jurisdictions in the table above that predominately use a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed.
The Board has delegated oversight for the following ESG matters to the following committees, who regularly report their actions to the Board: • Risk Management Committee: Mortgage Credit Risk, including risks associated with climate change. • Management Development, Nominating and Governance Committee: Corporate governance and human capital management policies such as executive compensation; succession planning; recruitment, retention and development of management resources; workforce planning, recruitment morale and talent; diversity and inclusion initiatives; and work environment, including health and safety. • Securities Investment Committee: Our investment portfolio; such oversight may include consideration of ESG factors. • Audit Committee: Disclosure controls and procedures relating to financial reports made to the SEC, as well as ESG reports. • Business Transformation and Technology Committee: Cybersecurity and business continuity.
The Board has delegated oversight for the following sustainability matters to the following committees, who regularly report their actions to the Board: • Risk Management Committee: Mortgage Credit Risk, including risks associated with climate change. • Management Development, Nominating and Governance Committee: Corporate governance and human capital management policies such as executive compensation; succession planning; recruitment, retention and development of management resources; workforce planning, recruitment morale and talent; diversity and inclusion initiatives; and work environment, including health and safety. • Securities Investment Committee: Our investment portfolio; such oversight may include consideration of sustainability factors. • Audit Committee: Disclosure controls and procedures relating to financial reports made to the SEC and corporate sustainability reports. • Business Transformation and Technology Committee: Cybersecurity and business continuity.
These strength and opportunities are shared with all co-workers for transparency, and leaders at all levels of the company are expected to play an active role in taking meaningful action in response. The annual engagement survey is complemented by additional quantitative, qualitative and passive listening mechanisms, ranging from new hire surveys to CEO-led focus groups.
For transparency, these strengths and opportunities are shared with all co-workers, and leaders at all levels of the company are expected to play an active role in taking meaningful action in response. The annual engagement survey is complemented by additional quantitative, qualitative and passive listening mechanisms, ranging from new hire surveys to CEO-led focus groups.
Under our current MGIC Investment Corporation 2022 Form 10-K | 19 MGIC Investment Corporation and Subsidiaries master policy terms, an insured can include accumulated interest only for the first three years the loan is delinquent. Other determinants of claim severity are the amount of the mortgage loan, the coverage percentage on the loan, loss mitigation efforts, and local market conditions.
Under our current master policy terms, an insured can include accumulated interest only for the first three years the loan is delinquent. MGIC Investment Corporation 2023 Form 10-K | 19 MGIC Investment Corporation and Subsidiaries Other determinants of claim severity are the amount of the mortgage loan, the coverage percentage on the loan, loss mitigation efforts, and local market conditions.
Community Involvement Our commitment to community is formalized under the banner of Giving Back, Together , and in 2022 included providing financial and in-kind support for organizations that support housing, youth programs, and the arts in our community and nationwide. We also provided paid time off for co-workers to volunteer or work at election polling places. H.
COMMUNITY INVOLVEMENT Our commitment to community is formalized under the banner of Giving Back, Together , and in 2023 included providing financial and in-kind support for organizations that support housing, youth programs, and the arts in our community and nationwide. We also provided paid time off for co-workers to volunteer or work at election polling places. H.
In 2022, a substantial majority of our volume was on loans with GSE standard or higher coverage. For loans that are not sold to the GSEs, the lender determines the coverage percentage from those that we offer. Higher coverage percentages generally result in increased severity, which is the amount paid on a claim.
In 2023, a substantial majority of our volume was on loans with GSE standard or higher coverage. For loans that are not sold to the GSEs, the lender determines the coverage percentage from those that we offer. Higher coverage percentages generally result in increased severity, which is the amount paid on a claim.
We charge higher premium rates to reflect the increased risk of claim incidence that we perceive is associated with a loan. Not all higher risk characteristics are reflected in our premium rates; however, in 2019 we introduced MiQ, our risk-based pricing system that establishes our premium rates based on more risk attributes than were considered in 2018.
We charge higher premium rates to reflect the increased risk of claim incidence that we perceive is associated with a loan. Not all higher risk characteristics are reflected in our premium rates; however, in 2019 we introduced MiQ, our risk-based pricing system that establishes our premium rates based on more risk attributes than were previously considered.
A significant period of time typically elapses between the time when a borrower becomes delinquent on a mortgage payment, which is the event triggering a potential future claim payment by us, the reporting of the delinquency to us, the acquisition of the property by the lender (typically through foreclosure) or the sale of the property, and the eventual payment of the claim related to the uncured delinquency or a rescission.
Loss Reserves A significant period of time typically elapses between the time when a borrower becomes delinquent on a mortgage payment, which is the event triggering a potential future claim payment by us, the reporting of the delinquency to us, the acquisition of the property by the lender (typically through foreclosure) or the sale of the property, and the eventual payment of the claim related to the uncured delinquency or a rescission.
As indicated in note (1), does not include ARMs in which the initial interest rate is fixed for at least five years. For both December 31, 2022 and 2021, ARMs with LTV ratios in excess of 90% represented 0.1%, of primary RIF, respectively.
As indicated in note (1), does not include ARMs in which the initial interest rate is fixed for at least five years. For both December 31, 2023 and 2022, ARMs with LTV ratios in excess of 90% represented 0.1%, of primary RIF, respectively.
(2) Includes ARMs where payments adjust fully with interest rate adjustments. Also includes pay option ARMs and other ARMs with negative amortization features, which collectively at each of December 31, 2022 and 2021, represented and 0.1%, respectively, of primary RIF.
(2) Includes ARMs where payments adjust fully with interest rate adjustments. Also includes pay option ARMs and other ARMs with negative amortization features, which collectively at each of December 31, 2023 and 2022, represented and 0.1%, respectively, of primary RIF.
The rating agency issuing the financial strength rating can withdraw or change its rating at any time. At the time that this annual report was finalized, the financial strength of MGIC was rated A- (with a stable outlook) by A.M.
The rating agency issuing the financial strength rating can withdraw or change its rating at any time. At the time that this annual report was finalized, the financial strength of MGIC was rated A- (with a positive outlook) by A.M.
Characteristics of primary risk in force December 31, 2022 December 31, 2021 Primary RIF (In millions) : $ 76,472 $ 69,337 Loan-to-value ratios: 95.01% and above 15.2 % 14.7 % 90.01 - 95.00% 52.0 % 50.4 % 85.01 - 90.00% 27.2 % 28.1 % 80.01 - 85.00% 5.4 % 6.4 % 80% and below 0.2 % 0.4 % Total 100.0 % 100.0 % Debt-to-income ratios: 45.01% and above 15.6 % 13.6 % 38.01% - 45.00% 31.6 % 31.5 % 38% and below 52.8 % 54.9 % Total 100.0 % 100.0 % Loan Type: Fixed (1) 99.5 % 99.4 % ARMs (2) 0.5 % 0.6 % Total 100.0 % 100.0 % Original Insured Loan Amount: (3) Conforming loan limit and below 97.3 % 97.5 % Non-conforming 2.7 % 2.5 % Total 100.0 % 100.0 % Mortgage Term: 15-years and under 1.1 % 1.7 % Over 15 years 98.9 % 98.3 % Total 100.0 % 100.0 % Property Type: Single-family detached 86.9 % 86.9 % Condominium/Townhouse/Other attached 12.5 % 12.4 % Other (4) 0.6 % 0.7 % Total 100.0 % 100.0 % Occupancy Status: Owner occupied 97.8 % 97.4 % Second home 2.1 % 2.4 % Investor property 0.1 % 0.2 % Total 100.0 % 100.0 % Documentation: Reduced: (5) Stated 0.6 % 0.7 % No 0.2 % 0.3 % Full documentation 99.2 % 99.0 % Total 100.0 % 100.0 % MGIC Investment Corporation 2022 Form 10-K | 14 MGIC Investment Corporation and Subsidiaries Characteristics of primary risk in force December 31, 2022 December 31, 2021 FICO Score: (6) 760 and greater 42.2 % 42.1 % 740 - 759 17.7 % 17.2 % 720 - 739 14.1 % 13.7 % 700 - 719 11.1 % 11.1 % 680 - 699 7.7 % 7.9 % 660 - 679 3.3 % 3.3 % 640 - 659 1.9 % 2.2 % 639 and less 2.0 % 2.5 % Total 100.0 % 100.0 % (1) Includes fixed rate mortgages with temporary buydowns (where in effect, the applicable interest rate is typically reduced by one or two percentage points during the first two years of the loan and then increased thereafter to the original interest rate), ARMs in which the initial interest rate is fixed for at least five years, and balloon payment mortgages (a loan with a maturity, typically five to seven years, that is shorter than the loan’s amortization period).
Characteristics of primary risk in force December 31, 2023 December 31, 2022 Primary RIF (In billions) : $ 77.2 $ 76.5 Loan-to-value ratios: 95.01% and above 15.7 % 15.2 % 90.01 - 95.00% 52.4 % 52.0 % 85.01 - 90.00% 27.2 % 27.2 % 80.01 - 85.00% 4.5 % 5.4 % 80% and below 0.2 % 0.2 % Total 100.0 % 100.0 % Debt-to-income ratios: 45.01% and above 17.5 % 15.6 % 38.01% - 45.00% 31.8 % 31.6 % 38% and below 50.7 % 52.8 % Total 100.0 % 100.0 % Loan Type: Fixed (1) 99.6 % 99.5 % ARMs (2) 0.4 % 0.5 % Total 100.0 % 100.0 % Original Insured Loan Amount: (3) Conforming loan limit and below 97.3 % 97.3 % Non-conforming 2.7 % 2.7 % Total 100.0 % 100.0 % Mortgage Term: 15-years and under 0.7 % 1.1 % Over 15 years 99.3 % 98.9 % Total 100.0 % 100.0 % Property Type: Single-family detached 86.7 % 86.9 % Condominium/Townhouse/Other attached 12.6 % 12.5 % Other (4) 0.7 % 0.6 % Total 100.0 % 100.0 % Occupancy Status: Owner occupied 98.1 % 97.8 % Second home 1.8 % 2.1 % Investor property 0.1 % 0.1 % Total 100.0 % 100.0 % Documentation: Reduced: (5) Stated 0.5 % 0.6 % No 0.2 % 0.2 % Full documentation 99.3 % 99.2 % Total 100.0 % 100.0 % MGIC Investment Corporation 2023 Form 10-K | 14 MGIC Investment Corporation and Subsidiaries Characteristics of primary risk in force December 31, 2023 December 31, 2022 FICO Score: (6) 760 and greater 43.1 % 42.2 % 740 - 759 17.9 % 17.7 % 720 - 739 14.1 % 14.1 % 700 - 719 10.8 % 11.1 % 680 - 699 7.3 % 7.7 % 660 - 679 3.2 % 3.3 % 640 - 659 1.8 % 1.9 % 639 and less 1.8 % 2.0 % Total 100.0 % 100.0 % (1) Includes fixed rate mortgages with temporary buydowns (where in effect, the applicable interest rate is typically reduced by one or two percentage points during the first two years of the loan and then increased thereafter to the original interest rate), ARMs in which the initial interest rate is fixed for at least five years, and balloon payment mortgages (a loan with a maturity, typically five to seven years, that is shorter than the loan’s amortization period).
Information about some of the other factors that can affect a mortgage insurer’s relationship with its customers can be found 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” in Item 1A . SALES AND MARKETING AND COMPETITION Sales and Marketing.
Information about some of the other factors that can affect a mortgage insurer’s relationship with its customers can be found 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” in Item 1A .
As of December 31, 2022, our principal mortgage insurance subsidiary, MGIC, was licensed in all 50 states of the United States, the District of Columbia, Puerto Rico and Guam.
As of December 31, 2023, our principal mortgage insurance subsidiary, MGIC, was licensed in all 50 states of the United States, the District of Columbia, Puerto Rico and Guam.
We call such reduction of claims submitted to us “curtailments.” In each of 2022 and 2021, curtailments reduced our average claim paid by approximately 6.3% and 4.4%, respectively. The COVID-19-related foreclosure moratoriums and forbearance plans, along with increased home prices, resulted in decreased claims paid activity beginning in the second quarter of 2020.
We call such reduction of claims submitted to us "curtailments.” In each of 2023 and 2022, curtailments reduced our average claim paid by approximately 5.4% and 6.3%, respectively. The COVID-19-related foreclosure moratoriums and forbearance plans, along with increased home prices, resulted in decreased claims paid activity beginning in the second quarter of 2020.
The operating environment for private mortgage insurers materially improved after the financial crisis, as the economy recovered. The COVID-19 pandemic had a material impact on our 2020 financial results. The increased level of unemployment and economic uncertainty resulted in an increase in the number of mortgage delinquencies for which we recorded increased loss reserves.
The operating environment for private mortgage insurers materially improved after the financial crisis, as the economy recovered. The COVID-19 pandemic had a material impact on our 2020 financial results. The increased level of unemployment and economic uncertainty resulted in an increase in our delinquency inventory for which we recorded increased loss reserves.
The primary delinquency rate for the top 15 jurisdictions (based on December 31, 2022 delinquency inventory) at December 31, 2022, 2021, and 2020 appears in table the below.
The primary delinquency rate for the top 15 jurisdictions (based on December 31, 2023 delinquency inventory) at December 31, 2023, 2022, and 2021 appears in table the below.
For further information, see our risk factors in Item 1A , including the ones 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,” and “Because loss reserve estimates are subject to uncertainties, paid claims may be substantially different than our loss reserves.” Our losses incurred were $(254.6) million in 2022, compared to $64.6 million and $364.8 million in 2021 and 2020, respectively.
For further information, see our risk factors in Item 1A , including the ones 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,” and “Because loss reserve estimates are subject to uncertainties, paid claims may be substantially different than our loss reserves.” Our losses incurred were $(20.9) million in 2023, compared to $(254.6) million and $64.6 million in 2022 and 2021, respectively.
Within 60 days after a claim has been filed and all documents required to be submitted to us have been delivered, we generally have the option to either (1) pay the coverage percentage specified for the insured loan, with the insured retaining title to the underlying property and receiving all proceeds from the eventual sale of the property (we have elected this option for the majority of claim payments in the recent past), (2) pay the loss on the sale of the property if it has already been sold (calculated by subtracting the sale proceeds from the claim amount) or (3) pay 100% of the claim amount in exchange for conveyance to us of good and marketable title to the property.
Within 60 days after a claim has been filed and all documents required to be submitted to us have been delivered, we generally have the option to either (1) pay the coverage percentage specified for the insured loan, with the insured retaining title to the underlying property and receiving all proceeds from the eventual sale of the property , (2) pay the loss on the sale of the property if it has already been sold (calculated by subtracting the sale proceeds from the claim amount) or (3) pay 100% of the claim amount in exchange for conveyance to us of good and marketable title to the property.
MGIC's “policyholder position” includes its net worth or surplus and its contingency reserve. At December 31, 2022, MGIC’s risk-to-capital ratio was 10.2 to 1, below the maximum allowed by the jurisdictions with State Capital Requirements, and its policyholder position was $3.5 billion above the required MPP of $2.1 billion.
MGIC's “policyholder position” includes its net worth or surplus and its contingency reserve. At December 31, 2023, MGIC’s risk-to-capital ratio was 10.2 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.
There can be no assurance that other federal laws and regulations affecting these institutions and entities will not MGIC Investment Corporation 2022 Form 10-K | 24 MGIC Investment Corporation and Subsidiaries change, or that new legislation or regulations will not be adopted which will adversely affect the private mortgage insurance industry. G.
There can be no assurance that other federal laws and regulations affecting these institutions and entities will not change, or that new legislation or regulations will not be adopted which will adversely affect the private mortgage insurance industry. MGIC Investment Corporation 2023 Form 10-K | 25 MGIC Investment Corporation and Subsidiaries G.
Asset-backed and mortgage-backed securities are not included in these maturity categories as the expected maturities may be different from the stated maturities depending upon the periodic payments during the life of the security. Asset-backed securities represent 13% of the investment portfolio (CLOs represent 6%, CMBS represent 5% and other asset-backed securities represent 2%).
Asset-backed and mortgage-backed securities are not included in these maturity categories as the expected maturities may be different from the stated maturities depending upon the periodic payments during the life of the security. Asset-backed securities represent 13% of the investment portfolio (CLOs represent 6%, CMBS represent 4% and other asset-backed securities represent 3%).
The high 2021 and 2020 volumes resulted, in part, from historically low interest rates driving sustained borrower demand, including for refinances, and the effect that the COVID-19 pandemic had on demand for homes.
The high 2021 volume resulted, in part, from historically low interest rates driving sustained borrower demand, including for refinances, and the effect that the COVID-19 pandemic had on demand for homes.
For information about losses incurred from 2020 to 2022, including the amounts of losses incurred that are associated with delinquency notices received in the reporting year compared to losses incurred associated with delinquency notices received in prior years, see Note 8 – "Loss Reserves" to our consolidated financial statements in Item 8 . D.
For information about losses incurred from 2021 to 2023, including the amounts of losses incurred that are associated with delinquency notices received in the reporting year compared to losses incurred associated with delinquency notices received in prior years, see Note 8 – "Loss Reserves" to our consolidated financial statements in Item 8 . D.
In recent years, the mortgage insurance industry has materially reduced its use of standard rate cards, which were fairly consistent among competitors, and correspondingly increased its use of (i)pricing systems that use a spectrum of filed rates to allow for formulaic, risk-based pricing based on multiple attributes that may be quickly adjusted within certain parameters, and (ii) customized rate plans, both of which typically have rates lower than the standard rate card.
In recent years, the mortgage insurance industry has materially reduced its use of standard rate cards, which were fairly consistent among competitors, and correspondingly increased its use of (i)"risk based pricing systems" that use a spectrum of filed rates to allow for formulaic, risk-based pricing based on multiple attributes that may be quickly adjusted within certain parameters, and (ii) customized rate plans.
Reinsurance Agreements We have in place quota share reinsurance ("QSR") and excess of loss reinsurance ("XOL") transactions providing various amounts of coverage on 85% of our risk in force as of December 31, 2022.
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, 2023.
We believe that, excluding other factors, claim incidence increases: • during periods of economic contraction and home price depreciation, including when these conditions may not be nationwide, compared to periods of economic expansion and home price appreciation; • for loans to borrowers with lower FICO scores compared to loans to borrowers with higher FICO scores; • for loans to borrowers with higher DTI ratios compared to loans to borrowers with lower DTI ratios; • for loans with less than full underwriting documentation compared to loans with full underwriting documentation; • for loans with higher LTV ratios compared to loans with lower LTV ratios; • for variable payment loans when the reset interest rate significantly exceeds the interest rate at the time of loan origination; • for loans that permit the deferral of principal amortization compared to loans that require principal amortization with each monthly payment; • for loans in which the original loan amount exceeds the conforming loan limit compared to loans below that limit; and • for cash out refinance loans compared to rate and term refinance loans.
We believe that, excluding other factors, claim incidence increases: MGIC Investment Corporation 2023 Form 10-K | 17 MGIC Investment Corporation and Subsidiaries • during periods of economic contraction and home price depreciation, including when these conditions may not be nationwide, compared to periods of economic expansion and home price appreciation; • for loans to borrowers with lower FICO scores compared to loans to borrowers with higher FICO scores; • for loans to borrowers with higher DTI ratios compared to loans to borrowers with lower DTI ratios; • for loans with less than full underwriting documentation compared to loans with full underwriting documentation; • for loans with higher LTV ratios compared to loans with lower LTV ratios; • for variable payment loans when the reset interest rate significantly exceeds the interest rate at the time of loan origination; • for loans that permit the deferral of principal amortization compared to loans that require principal amortization with each monthly payment; • for loans in which the original loan amount exceeds the conforming loan limit compared to loans below that limit; and • for cash out refinance loans compared to rate and term refinance loans.
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 2023, MGIC can pay $92 million of ordinary dividends without OCI approval, before taking into consideration dividends paid in the preceding twelve months.
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.
MORTGAGE CREDIT RISK We believe that mortgage credit risk is materially affected by: • the condition of the economy, including the direction of change in home prices and employment, in the area in which the property is located; • the borrower’s credit profile, including the borrower’s credit history, DTI ratio and cash reserves, and the MGIC Investment Corporation 2022 Form 10-K | 17 MGIC Investment Corporation and Subsidiaries willingness of a borrower with sufficient resources to make mortgage payments when the mortgage balance exceeds the value of the home; • the loan product, which encompasses the LTV ratio, the type of loan instrument, including whether the instrument provides for fixed or variable payments and the amortization schedule, the type of property and the purpose of the loan; • origination practices of lenders and the percentage of coverage on insured loans; and • the size of insured loans.
MORTGAGE CREDIT RISK We believe that mortgage credit risk is materially affected by: • the condition of the economy, including the direction of change in home prices and employment, in the area in which the property is located; • the borrower’s credit profile, including the borrower’s credit history, DTI ratio and cash reserves, and the willingness of a borrower with sufficient resources to make mortgage payments when the mortgage balance exceeds the value of the home; • the loan product, which encompasses the LTV ratio, the type of loan instrument, including whether the instrument provides for fixed or variable payments and the amortization schedule, the type of property and the purpose of the loan; • origination practices of lenders and the percentage of coverage on insured loans; and • the size of insured loans.
The Company’s Internal Audit function, which reports to the Audit Committee of the Board of Directors, provides independent ongoing assessments of the Company’s management of certain enterprise risks and reports its findings to the Audit Committee. Risk Identification and Assessment .
The Company’s Internal Audit function, which reports to the Audit Committee of the Board of Directors, provides independent ongoing assessments of the Company’s management of certain enterprise risks and reports its findings to the Audit Committee.
In calculating Minimum Required Assets, we receive significant credit for risk ceded under our reinsurance transactions. See "Reinsurance" in this Item 1 for information about our reinsurance transactions and "Regulation – Direct Regulation" in this Item 1 for information about our compliance with the financial requirements of the PMIERs.
In calculating Minimum Required Assets, MGIC receives significant credit for risk ceded under reinsurance transactions. See "Reinsurance" in this Item 1 for information about our reinsurance transactions and "Regulation – Direct Regulation" in this Item 1 for information about our compliance with the financial requirements of the PMIERs.
As of December 31, 2022, approximately 95% 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.
As of December 31, 2023, approximately 92% 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.
The weighted average “decision FICO score” at loan origination for NIW in 2022 was 747 compared to 749 in 2021. The FICO score for a loan with multiple borrowers is the lowest of the borrowers’ decision FICO scores.
The weighted average “decision FICO score” at loan origination for NIW in 2023 was 753 compared to 747 in 2022. The FICO score for a loan with multiple borrowers is the lowest of the borrowers’ decision FICO scores.
During 2022, 2021 and 2020, the single premium plan represented approximately 4%, 7% and 9%, respectively, of our NIW. The monthly premium plan represented approximately 96%, 93% and 91%, respectively. The annual premium plan represented less than 1% of NIW in each of those years.
During 2023, 2022 and 2021, the single premium plan represented approximately 4%, 4% and 7%, respectively, of our NIW. The monthly premium plan represented approximately 96%, 96% and 93%, respectively. The annual premium plan represented less than 1% of NIW in each of those years.
For information about the credit ratings of securities in our investment portfolio, see "Balance Sheet Review" in Item 7 . Investment Operations At December 31, 2022, the sectors represented in our investment portfolio were as shown in the table below: Investment portfolio - sectors Percentage of Portfolio’s Fair Value 1. Corporate 41% 2. Tax-Exempt Municipals 18% 3.
For information about the credit ratings of securities in our investment portfolio, see "Balance Sheet Review" in Item 7 . Investment Operations At December 31, 2023, the sectors represented in our investment portfolio were as shown in the table below: Investment portfolio - sectors Percentage of Portfolio’s Fair Value 1. Corporate 44% 2. Tax-Exempt Municipals 10% 3.
For flow business, we and other private mortgage insurers compete directly with federal and state government and quasi-governmental agencies, principally the FHA and the VA.
We and other private mortgage insurers compete directly with federal and state government and quasi-governmental agencies, principally the FHA and the VA.
In 2022, $405 billion of mortgages were insured with primary coverage by private mortgage insurers, compared to $585 for the full year of 2021, and $600 billion for full year 2020.
In 2023, $284 billion of mortgages were insured with primary coverage by private mortgage insurers, compared to $405 for the full year of 2022, and $585 billion for full year 2021.
(3) Loans within the conforming loan limit have an original principal balance that does not exceed the maximum original principal balance of loans that the GSEs will purchase. The conforming loan limit for one unit properties was $510,400 for 2020, $548,250 for 2021, and $647,200 for 2022, and is $726,200 for 2023.
(3) Loans within the conforming loan limit have an original principal balance that does not exceed the maximum original principal balance of loans that the GSEs will purchase. The conforming loan limit for one unit properties was $548,250 for 2021, $647,200 for 2022, and $726,200 for 2023, and is $766,550 for 2024.
Wisconsin has also adopted the annual enterprise risk reporting and "Corporate Governance Disclosure" requirements of the NAIC Model Act.
Wisconsin has also adopted the annual enterprise risk reporting, group capital calculation, and "Corporate Governance Disclosure" requirements of the NAIC Model Act.
Primary insurance and risk in force (In billions) 2022 2021 2020 2019 2018 Primary IIF $ 295.3 $ 274.4 $ 246.6 $ 222.3 $ 209.7 Primary RIF 76.5 69.3 61.8 57.2 54.1 For loans sold to a GSE, the coverage percentage must comply with the requirements established by the particular GSE to which the loan is delivered.
Primary insurance and risk in force (In billions) 2023 2022 2021 2020 2019 Primary IIF $ 293.5 $ 295.3 $ 274.4 $ 246.6 $ 222.3 Primary RIF 77.2 76.5 69.3 61.8 57.2 For loans sold to a GSE, the coverage percentage must comply with the requirements established by the particular GSE to which the loan is delivered.
Taxable Municipals 22% 4. Asset-Backed 13% 5. U.S. government and agency debt 2% 6. GNMA and other agency mortgage-backed securities 4% 100% We have no derivative financial instruments in our investment portfolio.
Taxable Municipals 23% 4. Asset-Backed 13% 5. U.S. government and agency debt 3% 6. GNMA and other agency mortgage-backed securities 7% 100% We have no derivative financial instruments in our investment portfolio.
On a regular basis, the Company monitors key risks with a focus on identifying risks or changes to risks with the greatest impact on the Company's ability to accomplish its strategic goals.
Risk Identification and Assessment On a regular basis, the Company monitors key risks with a focus on identifying risks or changes to risks with the greatest impact on the Company's ability to accomplish its strategic goals.
There can be no assurance that our premium rates adequately reflect the increased risk, particularly in a period of economic recession, high unemployment, slowing home price appreciation or home price declines, or when extraordinary events occur, such as the Covid-19 pandemic, the Russia-Ukraine war, periods of extreme inflation, or environmental disasters related to changing climactic conditions.
There can be no assurance that our premium rates adequately reflect the increased risk, particularly in a period of economic recession, high unemployment, slowing home price appreciation or home price declines, or when extraordinary events occur, such as pandemics, wars, periods of extreme inflation, or environmental disasters related to changing climactic conditions.
For additional information, see our risk factors in Item 1A , including the one titled “The premiums we charge may not be adequate to compensate us for our liabilities for losses and as a result any inadequacy could materially affect our financial condition and results of operations.” Underwriting Insurance Applications.
For additional information, see our risk factors in Item 1A , including the one titled “The premiums we charge may not be adequate to compensate us for our liabilities for losses and as a result any inadequacy could materially affect our financial condition and results of operations.” Underwriting Insurance Applications Applications for mortgage insurance are submitted to us through both our delegated and non-delegated options.
The limit for high cost communities has been higher and is $1,089,300 for 2023. Non-conforming loans are loans with an original principal balance above the conforming loan limit. (4) Includes cooperatives and manufactured homes deemed to be real estate.
The limit for high cost communities has been higher and is $1,149,825 for 2024. Non-conforming loans are loans with an original principal balance above the conforming loan limit. (4) Includes cooperatives and manufactured homes deemed to be real estate.
GNMA and other agency mortgage-backed securities represent 4% of the investment portfolio. Our pre-tax yield was 3.0%, 2.5%, and 2.6% for 2022, 2021, and 2020, respectively, and our after-tax yield was 2.5%, 2.1%, and 2.1% for 2022, 2021, and 2020, respectively.
GNMA and other agency mortgage-backed securities represent 7% of the investment portfolio. Our pre-tax yield was 3.7%, 3.0%, and 2.5% for 2023, 2022, and 2021, respectively, and our after-tax yield was 3.0%, 2.5%, and 2.1% for 2023, 2022, and 2021, respectively.
All full-time MGIC co-workers are eligible to participate in our health program, which is calibrated toward well-being through our popular Health Rewards program in addition to a comprehensive medical, dental and vision plan. We also recognize financial health as part of well-being, and so currently provide a 401(k) plan with company match and discretionary annual profit-sharing contributions.
All full-time MGIC co-workers are eligible to participate in our health program, in addition to a comprehensive medical, dental and vision plan. We also recognize financial health as part of well-being, and currently provide a 401(k) plan with a company match and discretionary annual profit-sharing contributions.
These requirements are subject to change from time to time. Based on our interpretation of the financial requirements of the PMIERs, as of December 31, 2022, MGIC’s Available Assets totaled $5.7 billion, or $2.3 billion in excess of its Minimum Required Assets.
These requirements are subject to change from time to time. Based on our interpretation of the financial requirements of the PMIERs, as of December 31, 2023, MGIC’s Available Assets totaled $5.8 billion, or $2.4 billion in excess of its Minimum Required Assets.
At December 31, 2022, approximately $647 million of investments and cash and cash equivalents was held by our parent company, and the remainder was held by our subsidiaries, primarily MGIC.
At December 31, 2023, approximately $918 million of investments and cash and cash equivalents was held by our parent company, and the remainder was held by our subsidiaries, primarily MGIC.
Mortgage insurance coverage is renewable at the option of the insured lender, at the renewal rate fixed when the loan was initially insured. Lenders may cancel insurance written on a flow basis at any time at their option or because of mortgage repayment, which may be accelerated because of the refinancing of mortgages.
Mortgage insurance coverage under monthly or annual premium plans are renewable at the option of the insured lender, at the renewal rate fixed when the loan was initially insured. Lenders may cancel insurance written on a flow basis at any time at their option or because of mortgage repayment, which may be accelerated because of the refinancing of mortgages.
The FHA, VA and USDA sponsor government-backed mortgage insurance programs, and it is estimated that during 2022, they accounted for a combined approximately 52.8% of the total low down payment residential mortgages which were subject to FHA, VA, USDA or primary private mortgage insurance, compared to 56.8% and 56.1% in 2021 and 2020, respectively.
The FHA, VA and USDA sponsor government-backed mortgage insurance programs, and it is estimated that during 2023, they accounted for a combined approximately 55.9% of the total low down payment residential mortgages which were subject to FHA, VA, USDA or primary private mortgage insurance, compared to 52.8% in 2022.
Wisconsin, our domiciliary state, has adopted the Risk Management and Own Risk and Solvency Assessment Act, which requires, among other things, that we conduct an Own Risk and Solvency Assessment ("ORSA"), at least annually, to assess the material risks associated with our business and our current and estimated projected future solvency position; and maintain a risk management framework to assess, monitor, manage and report on material risks.
Wisconsin, our domiciliary state, has adopted the Risk Management and Own Risk and Solvency Assessment Act, which requires, among other things, that we conduct an Own Risk and Solvency Assessment ("ORSA"), at least annually, to assess the material risks associated with our business and our current and estimated projected future solvency position; and maintain a risk management MGIC Investment Corporation 2023 Form 10-K | 23 MGIC Investment Corporation and Subsidiaries framework to assess, monitor, manage and report on material risks.
The primary delinquency inventory in those same jurisdictions at December 31, 2022 and 2021 appears in “Management’s Discussion and Analysis – Consolidated Results of Operations – Losses and expenses – Loss Reserves,” in Item 7 . Claims. Claims result from delinquencies that are not cured or a short sale that we approve.
The primary delinquency inventory in those same jurisdictions at December 31, 2023 and 2022 appears in “Management’s Discussion and Analysis – Consolidated Results of Operations – Losses and expenses – Loss Reserves,” in Item 7 . Claims Claims result from delinquencies that are not cured. .
The DEI Executive Council has undertaken a number of initiatives since its inception, including: • Recognizing eight DEI observance days through co-worker education, engagement and action • Launching DEI workshops and dialogue sessions for all MGIC officers • Prioritizing DEI in each all-company meeting and engaging executive leadership in ongoing advocacy and endorsement Total Rewards and Talent Practices Our total rewards program is designed to provide a competitive package of benefits and compensation elements that recognize the unique needs of our workforce and their families.
The DEI Executive Council has undertaken a number of initiatives since its inception, including: • Recognizing ten DEI observances through co-worker education, engagement, action, and charitable contributions • Launching DEI workshops and dialogue sessions • Prioritizing DEI in all-company meetings and engaging executive leadership in ongoing advocacy and endorsement TOTAL REWARDS AND TALENT PRACTICES Our total rewards program is designed to provide a competitive package of benefits and compensation elements that recognize the unique needs of our workforce and their families.
We also establish reserves to provide for the estimated costs of settling claims, general expenses of administering the claims settlement process, legal fees and other fees (“loss adjustment expenses”), and for losses and loss adjustment expenses from delinquencies that have occurred, but have not yet been reported to us (IBNR).
MGIC Investment Corporation 2023 Form 10-K | 20 MGIC Investment Corporation and Subsidiaries We also establish reserves to provide for the estimated costs of settling claims, general expenses of administering the claims settlement process, legal fees and other fees (“loss adjustment expenses”), and for losses and loss adjustment expenses from delinquencies that have occurred, but have not yet been reported to us (IBNR).
The percentage of NIW on loans representing refinances was 3% for 2022, compared to 20% for 2021 and 36% for 2020.
The percentage of NIW on loans representing refinances was 2% for 2023, compared to 3% for 2022 and 20% for 2021.
Our QSR transactions are with unaffiliated reinsurers and cover most of our insurance written from 2020 through 2023, and a smaller percentage of our insurance written from 2024 through 2025. The weighted average coverage percentage of our QSR transactions was 33%, based on risk in force as of December 31, 2022.
QUOTA SHARE TRANSACTIONS Our QSR Transactions are with unaffiliated reinsurers. As of December 31, 2023, our QSR transactions cover most of our insurance written from 2021 through 2024, and a smaller percentage of our insurance written from 2025. The weighted average coverage percentage of our QSR transactions was 32.0%, based on risk in force as of December 31, 2023.
The special purpose insurers 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 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.
As the most significant purchasers and sellers of conventional mortgage loans and beneficiaries of private mortgage insurance, the GSEs impose financial and other requirements on private mortgage insurers in order for them to be eligible to insure loans sold to the GSEs (these requirements are referred to as the "PMIERs", as discussed above).
MGIC Investment Corporation 2023 Form 10-K | 24 MGIC Investment Corporation and Subsidiaries As the most significant purchasers and sellers of conventional mortgage loans and beneficiaries of private mortgage insurance, the GSEs impose financial and other requirements on private mortgage insurers in order for them to be eligible to insure loans sold to the GSEs (these requirements are referred to as the "PMIERs", as discussed above).
In 2022, our total revenues were $1.2 billion and our primary NIW was $76.4 billion. As of December 31, 2022, our direct primary IIF was $295.3 billion and our direct primary RIF was $76.5 billion. For further information about our results of operations, see our consolidated financial statements in Item 8 and our MD&A in Item 7.
In 2023, our total revenues were $1.2 billion and our primary NIW was $46.1 billion. As of December 31, 2023, our direct primary IIF was $293.5 billion and our direct primary RIF was $77.2 billion. For further information about our results of operations, see our consolidated financial statements in Item 8 and our MD&A in Item 7.
The provisions of HOPA described above apply only to borrower paid mortgage insurance, which is described below. Coverage tends to continue for borrowers experiencing economic difficulties or living in areas experiencing home price depreciation.
Annually, servicers must inform borrowers of their right to cancel or terminate mortgage insurance. The provisions of HOPA described above apply only to borrower paid mortgage insurance, which is described below. Coverage tends to continue for borrowers experiencing economic difficulties or living in areas experiencing home price depreciation.
If the borrower is not required to pay the premium and MGIC Investment Corporation 2022 Form 10-K | 11 MGIC Investment Corporation and Subsidiaries mortgage insurance is required in connection with the origination of the loan, then the premium is paid by the lender, who may recover the premium through an increase in the note rate on the mortgage or higher origination fees.
If the borrower is not required to pay the premium and mortgage insurance is required in connection with the origination of the loan, then the premium is paid by the lender, who may recover the premium through an increase in the note rate on the mortgage or higher origination fees.
The majority of loans we insured from 2005 through 2008 (which represent 32% 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 of accumulated interest that an insured may include in a claim.
The majority of loans we insured prior to 2014 (which represent 37% 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 of accumulated interest that an insured may include in a claim.
During 2022, we wrote new insurance in each of those jurisdictions. 2023 BUSINESS STRATEGIES Our business strategies continue to be to 1) maximize the value we create through our mortgage credit enhancement activities; 2) differentiate ourselves through our customer experience; 3) establish a competitive advantage through our digital and analytical capabilities; 4) excel at acquiring, managing and distributing mortgage credit risk and the related capital; 5) maintain financial strength through economic cycles; and 6) foster an environment that embraces diversity and best positions our people to succeed. 2022 ACCOMPLISHMENTS Following are several of our 2022 accomplishments that furthered our business strategies. • Earned $865 million of net income ($2.79 per diluted share) for the year, compared to $635 million ($1.85 per diluted share) in 2021. • Increased primary IIF by more than 7.6% year-over-year. • Expanded our reinsurance program by securing quota share reinsurance covering the majority of our 2022 and 2023 NIW, and executing excess of loss reinsurance through an ILN and the traditional reinsurance market.
During 2023, we wrote new insurance in each of those jurisdictions. 2024 BUSINESS STRATEGIES Our business strategies continue to be to 1) maximize the value we create through our mortgage credit enhancement activities; 2) differentiate ourselves through our customer experience; 3) establish a competitive advantage through our digital and analytical capabilities; 4) excel at acquiring, managing and distributing mortgage credit risk and the related capital; 5) maintain financial strength through economic cycles; and 6) foster an environment that embraces diversity and best positions our people to succeed. 2023 ACCOMPLISHMENTS Following are several of our 2023 accomplishments that furthered our business strategies. • Earned $713 million of net income ($2.49 per diluted share) for the year, compared to $865 million ($2.79 per diluted share) in 2022. • Expanded our reinsurance program by securing quota share reinsurance covering the majority of our 2024 NIW, entered into a $330 million excess of loss reinsurance agreement executed through a mortgage insurance linked notes transaction in the capital market, and placed a forward-commitment excess of loss reinsurance agreement covering 2023 NIW.
Investment Portfolio POLICY AND STRATEGY At December 31, 2022, the fair value of our investment portfolio was approximately $5.4 billion. In addition, at December 31, 2022, our total assets included approximately $333 million of cash and cash equivalents.
E. Investment Portfolio POLICY AND STRATEGY At December 31, 2023, the fair value of our investment portfolio was approximately $5.7 billion. In addition, at December 31, 2023, our total assets included approximately $364 million of cash and cash equivalents.
These requirements and practices, as well as those of the federal regulators that oversee the GSEs and lenders, impact the operating results and financial performance of private mortgage insurers. In 2008, the federal MGIC Investment Corporation 2022 Form 10-K | 8 MGIC Investment Corporation and Subsidiaries government took control of the GSEs through a conservatorship process.
These requirements and practices, as well as those of the federal regulators that oversee the GSEs and lenders, impact the operating results and financial performance of private mortgage insurers. In 2008, the federal government took control of the GSEs through a conservatorship process.
Corporate Sustainability Risk Governance . The Company maintains a Corporate Sustainability Executive Council that, at the management level, supports the Company's on-going commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to the Company.
Corporate Sustainability Risk Governance The Company maintains a Corporate Sustainability Executive Council that, at the management level, supports the Company's on-going commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public MGIC Investment Corporation 2023 Form 10-K | 16 MGIC Investment Corporation and Subsidiaries policy matters relevant to the Company.
Mortgage insurers are generally single-line companies, restricted to writing residential mortgage insurance business only. Although we, as an insurance holding company, are prohibited from engaging in certain transactions with MGIC or our other insurance subsidiaries without submission to and, in some instances, prior approval by applicable insurance departments, we are not subject to insurance company regulation on our non-insurance businesses.
Although we, as an insurance holding company, are prohibited from engaging in certain transactions with MGIC or our other insurance subsidiaries without submission to and, in some instances, prior approval by applicable insurance departments, we are not subject to insurance company regulation on our non-insurance businesses.
The insurance laws of 16 jurisdictions, including Wisconsin, MGIC's domiciliary state, require a mortgage insurer to maintain a minimum amount of statutory capital relative to the RIF (or a similar measure) in order for the mortgage insurer to continue to write new business.
The insurance laws of 16 jurisdictions, including Wisconsin, MGIC's domiciliary state, require a mortgage insurer to maintain a minimum amount of statutory capital relative to the RIF (or a similar measure) in order for the mortgage insurer to continue to write new business. Additionally, in 2023 a revised Mortgage Guaranty Insurance Model Act was adopted by the NAIC.
Inside Mortgage Finance estimates that in 2022, the VA accounted for 24.5% of all low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance, compared to 30.2% in 2021 and 30.9% in 2020.
Inside Mortgage Finance estimates that in 2023, the VA accounted for 21.5% of all low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance, compared to 24.5% in 2022 and 30.2% in 2021. Since 2012, the VA's market share has been as high as 30.9% (in 2020).
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 8%, 24%, 32% and 20%, respectively, of the total fair value of our fixed income investment securities.
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 11%, 26%, 30%, and 14%, respectively, of the total fair value of our fixed income investment securities.
MGIC Investment Corporation 2022 Form 10-K | 20 MGIC Investment Corporation and Subsidiaries Our reserving process bases our estimates of future events on our past experience. For further information about our loss reserving methodology, refer to “Management’s Discussion and Analysis – Critical Accounting Estimates,” in Item 7 .
Our reserving process bases our estimates of future events on our past experience. For further information about our loss reserving methodology, refer to “Management’s Discussion and Analysis – Critical Accounting Estimates,” in Item 7 .
Our XOL transactions provide XOL reinsurance coverage for a portion of the risk associated with certain mortgage insurance policies having insurance coverage in force dates from July 1, 2016 through March 31, 2019 and January 1, 2020 through December 30, 2022, all dates inclusive.
Our Home Re transactions issued notes linked to the reinsurance coverage ("Insurance Linked Notes" or "ILNs"). Our XOL transactions provide XOL reinsurance coverage for a portion of the risk associated with certain mortgage insurance policies having insurance coverage in force dates from July 1, 2016 through March 31, 2019 and January 1, 2020 through December 29, 2023, all dates inclusive.
Top 10 jurisdictions – RIF California 8.3 % Texas 7.6 % Florida 6.7 % Pennsylvania 4.9 % Illinois 4.2 % Virginia 3.9 % North Carolina 3.8 % Ohio 3.7 % Georgia 3.7 % New York 3.5 % Total 50.3 % Top 10 core-based statistical areas – RIF Washington-Arlington-Alexandria 3.2 % Atlanta-Sandy Springs-Roswell 2.7 % Chicago-Naperville-Arlington Heights 2.7 % Houston-Woodlands-Sugar Land 2.3 % Minneapolis-St.
Top 10 jurisdictions – RIF California 8.6 % Texas 7.7 % Florida 6.7 % Pennsylvania 5.1 % Illinois 4.1 % Virginia 3.9 % North Carolina 3.7 % Ohio 3.6 % Georgia 3.5 % New York 3.5 % Total 50.4 % Top 10 metropolitan-based statistical areas – RIF New York-Newark-Jersey City 4.3 % Washington-Arlington-Alexandria 4.1 % Chicago-Naperville-Arlington Heights 3.3 % Atlanta-Sandy Springs-Roswell 2.6 % Philadelphia-Camden-Wilmington 2.6 % Dallas-Fort Worth 2.4 % Los Angeles-Long Beach-Anaheim 2.3 % Houston-Woodlands-Sugar Land 2.2 % Minneapolis-St.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to compete effectively in the current or any future markets as a result of the financial strength ratings assigned to our insurance subsidiaries, our future NIW could be negatively affected. • A downgrade in our financial strength ratings could result in increased scrutiny of our financial condition by the GSEs and/or our customers, potentially resulting in a decrease in the amount of our NIW. • Our ability to participate in the non-GSE residential mortgage-backed securities market (the size of which has been limited since 2008, but may grow in the future), could depend on our ability to maintain and improve our investment grade ratings for our insurance subsidiaries.
Biggest changeDowngrades in our financial strength ratings could materially affect our business and results of operations, including in the ways described below: • Our failure to maintain a rating acceptable to the GSEs could impact our eligibility as an approved insurer under PMIERs. • A downgrade in our financial strength ratings could result in increased scrutiny of our financial condition by the GSEs and/or our customers, potentially resulting in a decrease in the amount of our NIW. • If we are unable to compete effectively in the current or any future markets as a result of the financial strength ratings assigned to our insurance subsidiaries, our future NIW could be negatively affected. • Our ability to participate in the non-GSE residential mortgage-backed securities market (the size of which has been limited since 2008, but may grow in the future), could depend on our ability to maintain and improve our investment grade ratings for our insurance subsidiaries.
The amount of equity affects persistency in the following ways: • Borrowers with significant equity may be able to refinance their loans without requiring mortgage insurance. • The Homeowners Protection Act (“HOPA”) requires servicers to cancel mortgage insurance when a borrower’s LTV ratio meets or is scheduled to meet certain levels, generally based on the original value of the home and subject to various conditions. • The GSEs’ mortgage insurance cancellation guidelines apply more broadly than HOPA and also consider a home’s current value.
The amount of equity affects persistency in the following ways: • Borrowers with significant equity may be able to refinance their loans without requiring mortgage insurance. • The Homeowners Protection Act (“HOPA”) requires servicers to cancel mortgage insurance when a borrower’s LTV ratio meets or is scheduled to meet certain levels, generally based on the original value of the home and subject to various conditions and exclusions. • The GSEs’ mortgage insurance cancellation guidelines apply more broadly than HOPA and also consider a home’s current value.
For more information, see the above discussion of the GSEs' Equitable Housing Plans and our risk factor titled “ Changes in interest rates, house prices or mortgage insurance cancellation requirements may change the length of time that our policies remain in force .” • The programs established by the GSEs intended to avoid or mitigate loss on insured mortgages and the circumstances in which mortgage servicers must implement such programs. • The terms that the GSEs require to be included in mortgage insurance policies for loans that they purchase, including limitations on the rescission rights of mortgage insurers. • The extent to which the GSEs intervene in mortgage insurers’ claims paying practices, rescission practices or rescission settlement practices with lenders. • The maximum loan limits of the GSEs compared to those of the FHA and other investors. • The benchmarks established by the FHFA for loans to be purchased by the GSEs, which can affect the loans available to be insured.
For more information, see the above discussion of the GSEs' Equitable Housing Plans and our risk factor titled “ Changes in interest rates, house prices or mortgage insurance cancellation requirements may change the length of time that our policies remain in force .” • The programs established by the GSEs intended to avoid or mitigate loss on insured mortgages and the circumstances in which mortgage servicers must implement such programs. • The terms that the GSEs require to be included in mortgage insurance policies for loans that they purchase, including limitations on the rescission rights of mortgage insurers. • The extent to which the GSEs intervene in mortgage insurers’ claims paying practices, rescission practices or rescission settlement practices with lenders. • The maximum loan limits of the GSEs compared to those of the Federal Housing Administration ("FHA") and other investors. • The benchmarks established by the FHFA for loans to be purchased by the GSEs, which can affect the loans available to be insured.
In addition to the risk factors described herein, the following factors may have an adverse impact on the market price for our common stock: changes in general conditions in the economy, the mortgage insurance industry or the financial markets; announcements by us or our competitors of acquisitions or strategic initiatives; our actual or anticipated quarterly and annual operating results; changes in expectations of future financial performance (including incurred losses on our insurance in force); changes in estimates of securities analysts or rating agencies; actual or anticipated changes in our share repurchase program or dividends; changes in operating performance or market valuation of companies in the mortgage insurance industry; the addition or departure of key personnel; changes in tax law; and adverse press or news announcements affecting us or the industry.
In addition to the risk factors described herein, the following factors may have an adverse impact on the market price for our common stock: changes in general conditions in the economy, the mortgage insurance industry or the financial stability of markets and financial services industry; announcements by us or our competitors of acquisitions or strategic initiatives; our actual or anticipated quarterly and annual operating results; changes in expectations of future financial performance (including incurred losses on our insurance in force); changes in estimates of securities analysts or rating agencies; actual or anticipated changes in our share repurchase program or dividends; changes in operating performance or market valuation of companies in the mortgage insurance industry; the addition or departure of key personnel; changes in tax law; and adverse press or news announcements affecting us or the industry.
Our persistency rate is primarily affected by the level of current mortgage interest rates compared to the mortgage coupon rates on our insurance in force, which affects the vulnerability of the insurance in force to refinancing; and the current amount of equity that borrowers have in the homes underlying our insurance in force.
Our persistency rate is primarily affected by the level of current mortgage interest rates compared to the mortgage coupon rates on our insurance in force, which affects the vulnerability of the IIF to refinancing; and the current amount of equity that borrowers have in the homes underlying our insurance in force.
The factors that may affect the volume of low down payment mortgage originations include the health of the U.S. economy, conditions in regional and local economies and the level of consumer confidence; restrictions on mortgage credit due to more stringent underwriting standards, liquidity issues or risk-retention and/or capital requirements affecting lenders; the level of home mortgage interest rates; housing affordability; new and existing housing availability; the rate of household formation, which is influenced, in part, by population and immigration trends; homeownership rates; the rate of home price appreciation, which in times of heavy refinancing can affect whether refinanced loans have LTV ratios that require private mortgage insurance; and government housing policy encouraging loans to first-time homebuyers.
The factors that may affect the volume of low down payment mortgage originations include the health of the U.S. economy; conditions in regional and local economies and the level of consumer confidence; the health and stability of the financial services industry; restrictions on mortgage credit due to more stringent underwriting standards, liquidity issues or risk-retention and/or capital requirements affecting lenders; the level of home mortgage interest rates; housing affordability; new and existing housing availability; the rate of household formation, which is influenced, in part, by population and immigration trends; homeownership rates; the rate of home price appreciation, which in times of heavy refinancing can affect whether refinanced loans have LTV ratios that require private mortgage insurance; and government housing policy encouraging loans to first-time homebuyers.
Best is A- (with a stable outlook), from Moody’s is A3 (with a stable outlook) and from Standard & Poor’s is BBB+ (with a stable outlook) . • Financial strength ratings may also play a greater role if the GSEs no longer operate in their current capacities, for example, due to legislative or regulatory action.
Best is A- (with a positive outlook), from Moody’s is A3 (with a stable outlook) and from Standard & Poor’s is A- (with a stable outlook) . • Financial strength ratings may also play a greater role if the GSEs no longer operate in their current capacities, for example, due to legislative or regulatory action.
For more information about the GSEs guidelines and business practices, and how they may change, see our risk factor titled “ Changes in the business practices of Fannie Mae and Freddie Mac's ("the GSEs") , federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses. ” We are susceptible to disruptions in the servicing of mortgage loans that we insure and we rely on third-party reporting for information regarding the mortgage loans we insure.
For more information about the GSEs' guidelines and business practices, and how they may change, see our risk factor titled “ Changes in the business practices of Fannie Mae and Freddie Mac ("the GSEs") , federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses. ” We are susceptible to disruptions in the servicing of mortgage loans that we insure and we rely on third-party reporting for information regarding the mortgage loans we insure.
Factors that influence the FHA’s market share include relative rates and fees, underwriting guidelines and loan limits of the FHA, VA, private mortgage insurers and the GSEs; lenders' perceptions of legal risks under FHA versus GSE programs; flexibility for the FHA to establish new products as a result of federal legislation and programs; returns expected to be obtained by lenders for Ginnie Mae securitization of FHA-insured loans compared to those obtained from selling loans to the GSEs for securitization; and differences in policy terms, such as the ability of a borrower to cancel insurance coverage under certain circumstances.
Factors that influence the FHA’s market share include relative rates and fees, underwriting guidelines and loan limits of the FHA, VA, private mortgage insurers and the GSEs; changes to the GSEs' business practices; lenders' perceptions of legal risks under FHA versus GSE programs; flexibility for the FHA to establish new products as a result of federal legislation and programs; returns expected to be obtained by lenders for Ginnie Mae securitization of FHA-insured loans compared to those obtained from selling loans to the GSEs for securitization; and differences in policy terms, such as the ability of a borrower to cancel insurance coverage under certain circumstances.
This decline may occur even absent a deterioration in economic conditions due to declines in demand for homes, which in turn may result from changes in buyers’ perceptions of the potential for future appreciation, restrictions on and the cost of mortgage credit due to more stringent underwriting standards, higher interest rates, changes to the tax deductibility of mortgage interest, decreases in the rate of household formations, or other factors.
A decline in home prices may occur even absent a deterioration in economic conditions due to declines in demand for homes, which in turn may result from changes in buyers’ perceptions of the potential for future appreciation, restrictions on and the cost of mortgage credit due to more stringent underwriting standards, higher interest rates, changes to the tax deductibility of mortgage interest, decreases in the rate of household formations, or other factors.
In addition, although the PMIERs do not require minimum financial strength ratings, the GSEs consider financial strength ratings to be important when using forms of credit enhancement other than traditional mortgage insurance, as discussed in our risk factor titled " The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance." The final GSE capital framework provides more capital credit for transactions with higher rated counterparties, as well as those who are diversified.
In addition, although the PMIERs do not require minimum financial strength ratings, the GSEs consider financial strength ratings to be important when using forms of credit enhancement other than traditional mortgage insurance, as discussed in our risk factor titled " The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance or are unable to obtain capital relief for mortgage insurance." The final GSE capital framework provides more capital credit for transactions with higher rated counterparties, as well as those who are diversified.
If state or federal regulations or statutes are changed in ways that ease mortgage lending standards and/or requirements, or if MGIC Investment Corporation 2022 Form 10-K | 33 MGIC Investment Corporation and Subsidiaries lenders seek ways to replace business in times of lower mortgage originations, it is possible that more mortgage loans could be originated with higher risk characteristics than are currently being originated, such as loans with lower FICO scores and higher DTI ratios.
MGIC Investment Corporation 2023 Form 10-K | 35 MGIC Investment Corporation and Subsidiaries If state or federal regulations or statutes are changed in ways that ease mortgage lending standards and/or requirements, or if lenders seek ways to replace business in times of lower mortgage originations, it is possible that more mortgage loans could be originated with higher risk characteristics than are currently being originated, such as loans with lower FICO scores and higher DTI ratios.
Other business practices of the GSEs that affect the mortgage insurance industry include: • The GSEs' private mortgage insurer eligibility requirements ("PMIERs"), the financial requirements of which are discussed in our risk factor titled “We may not continue to meet the GSEs’ private mortgage insurer eligibility requirements and our returns may decrease if we are required to maintain more capital in order to maintain our eligibility.” • The capital and collateral requirements for participants in the GSEs' alternative forms of credit enhancement discussed in MGIC Investment Corporation 2022 Form 10-K | 26 MGIC Investment Corporation and Subsidiaries our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance." • The level of private mortgage insurance coverage, subject to the limitations of the GSEs’ charters, when private mortgage insurance is used as the required credit enhancement on low down payment mortgages (the GSEs generally require a level of mortgage insurance coverage that is higher than the level of coverage required by their charters; any change in the required level of coverage will impact our new risk written). • The amount of loan level price adjustments and guaranty fees (which result in higher costs to borrowers) that the GSEs assess on loans that require private mortgage insurance.
Other business practices of the GSEs that affect the mortgage insurance industry include: MGIC Investment Corporation 2023 Form 10-K | 27 MGIC Investment Corporation and Subsidiaries • The GSEs' private mortgage insurer eligibility requirements ("PMIERs"), the financial requirements of which are discussed in our risk factor titled “We may not continue to meet the GSEs’ private mortgage insurer eligibility requirements and our returns may decrease if we are required to maintain more capital in order to maintain our eligibility.” • The capital and collateral requirements for participants in the GSEs' alternative forms of credit enhancement discussed in our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance or are unable to obtain capital relief for mortgage insurance." • The level of private mortgage insurance coverage, subject to the limitations of the GSEs’ charters, when private mortgage insurance is used as the required credit enhancement on low down payment mortgages (the GSEs generally require a level of mortgage insurance coverage that is higher than the level of coverage required by their charters; any change in the required level of coverage will impact our new risk written). • The amount of loan level price adjustments and guaranty fees (which result in higher costs to borrowers) that the GSEs assess on loans that require private mortgage insurance.
Our "Minimum Required Assets" reflect a credit for risk ceded under our quota share reinsurance ("QSR") and XOL reinsurance transactions, which are discussed in our risk factor titled "The mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring." 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 points of the coverage, all of which fluctuate over time.
Our "Minimum Required Assets" reflect a credit for risk ceded under our QSR and XOL reinsurance transactions, which are discussed in our risk factor titled "Our underwriting practices and the mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring." 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 points of the coverage, all of which fluctuate over time.
For example: we rely on information provided to us by lenders that was obtained from certain of the GSEs’ automated appraisal and income verification tools, which may produce results that differ from the results that would have been determined using different methods; we accept GSE appraisal waivers for certain refinance loans, the numbers of which have increased significantly beginning in 2020; and we accept GSE appraisal flexibilities that allow property valuations in certain transactions to be based on appraisals that do not involve an onsite or interior inspection of the property.
For example: we rely on information provided to us by lenders that was obtained from certain of the GSEs’ automated appraisal and income verification tools, which may produce results that differ from the results that would have been determined using different methods; we accept GSE appraisal waivers for certain refinance loans; and we accept GSE appraisal flexibilities that allow property valuations in certain transactions to be based on appraisals that do not involve an onsite or interior inspection of the property.
Our relationships with our customers, which may affect the amount of our NIW, could be adversely affected by a variety of factors, including if our premium rates are higher than those of our competitors, our underwriting requirements are more restrictive than those of our competitors, or our customers are dissatisfied with our claims-paying practices (including insurance policy rescissions and claim curtailments).
Our relationships with our customers, which may affect the amount of our NIW, could be adversely affected by a variety of factors, including if our premium rates are higher than those of our competitors, our underwriting requirements are more restrictive than those of our competitors, our customers are dissatisfied with our claims-paying practices (including insurance policy rescissions and claim curtailments), or the availability of alternatives to mortgage insurance.
Our investment portfolio also includes commercial mortgage-backed securities, collateralized loan obligations, and asset-backed securities, which could be adversely affected by declines in real estate valuations, increases in unemployment, geopolitical risks and/or financial market disruption, including a heightened collection risk on the underlying loans.
Our investment portfolio also includes commercial mortgage-backed securities, collateralized loan obligations, and asset-backed securities, which could be adversely affected by declines in real estate valuations, increases in unemployment, geopolitical risks and/or financial market disruption, including more restrictive lending conditions and a heightened collection risk on the underlying loans.
Item 1A. Risk Factors As used below, “we,” “our” and “us” refer to MGIC Investment Corporation’s consolidated operations or to MGIC Investment Corporation, as the context requires; and “MGIC” refers to Mortgage Guaranty Insurance Corporation. Risk Factors Relating to Global Events The Russia-Ukraine war and/or other global events may adversely affect the U.S. economy and our business.
Item 1A. Risk Factors As used below, “we,” “our” and “us” refer to MGIC Investment Corporation’s consolidated operations or to MGIC Investment Corporation, as the context requires; and “MGIC” refers to Mortgage Guaranty Insurance Corporation. Risk Factors Relating to Global Events Wars and/or other global events may adversely affect the U.S. economy and our business.
Regarding the concentration of our new business, our top ten customers accounted for approximately 33% and 36% in the twelve months ended December 31, 2022 and December 31, 2021, respectively. We monitor various competitive and economic factors while seeking to balance both profitability and market share considerations in developing our pricing strategies.
Regarding the concentration of our new business, our top ten customers accounted for approximately 37% and 33% in the twelve months ended December 31, 2023 and December 31, 2022, respectively. We monitor various competitive and economic factors while seeking to balance both profitability and market share considerations in developing our pricing strategies.
Alternatives to private mortgage insurance include: • investors using risk mitigation and credit risk transfer techniques other than private mortgage insurance, or accepting credit risk without credit enhancement, • lenders and other investors holding mortgages in portfolio and self-insuring, • lenders using Federal Housing Administration ("FHA"), U.S.
Alternatives to private mortgage insurance include: • investors using risk mitigation and credit risk transfer techniques other than private mortgage insurance, or accepting credit risk without credit enhancement, • lenders and other investors holding mortgages in portfolio and self-insuring, • lenders using FHA, U.S.
It is possible that efforts to manage this risk by the FHFA, GSEs (including through GSE guideline or mortgage insurance policy changes) or others could materially impact the volume and characteristics of our NIW (including its policy terms), home prices in certain areas and defaults by borrowers in certain areas.
It is possible that efforts to manage these risks by the FHFA, GSEs (including through GSE guideline or mortgage insurance policy changes) or others could materially impact the volume and characteristics of our NIW (including its policy terms), home prices in certain areas and defaults by borrowers in certain areas.
To the extent the business practices and policies of the GSEs regarding mortgage insurance coverage, costs and cancellation change, including more broadly than through SPCPs, such changes may negatively impact the mortgage insurance industry.
To the extent the business practices and policies of the GSEs regarding mortgage insurance coverage, costs and cancellation change, including more broadly than through SPCPs, such changes may negatively impact the mortgage insurance industry and our financial results.
In the twelve months ended December 31, 2022, MGIC paid $800 million in dividends to the holding company. Future dividend payments from MGIC to the holding company will be determined in consultation with the board of directors, and after considering any updated estimates about our business.
In the twelve months ended December 31, 2023, MGIC paid $600 million in dividends to the holding company. Future dividend payments from MGIC to the holding company will be determined in consultation with the board of directors, and after considering any updated estimates about our business.
In 2023, MGIC can pay $92 million of ordinary dividends without OCI approval, before taking into consideration dividends paid in the preceding twelve months. A dividend is extraordinary when the proposed dividend amount plus dividends paid in the last twelve months from 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. A dividend is extraordinary when the proposed dividend amount plus dividends paid in the last twelve months from the dividend payment date exceed the ordinary dividend level.
In recent years, the industry has materially reduced its use of standard rate cards, which were fairly consistent among competitors, and correspondingly increased its use of (i) pricing systems that use a spectrum of filed rates to allow for formulaic, risk-based pricing based on multiple attributes that may be quickly adjusted within certain parameters, and (ii) customized rate plans, both of which typically have rates lower than the standard rate card.
In recent years, the industry has materially reduced its use of standard rate cards, which were fairly consistent among competitors, and correspondingly increased its use of (i) pricing systems that use a spectrum of filed rates to allow for formulaic, risk-based pricing based on multiple attributes that may be quickly adjusted within certain parameters, and (ii) customized rate plans.
While there has been no disruption in our premium receipts through the end of 2022, servicers who experience future liquidity issues may be less likely to advance premiums to us on policies covering delinquent loans or to remit premiums on policies covering loans that are not delinquent.
While there has been no disruption in our premium receipts through the fourth quarter of 2023, servicers who experience future liquidity issues may be less likely to advance premiums to us on policies covering delinquent loans or to remit premiums on policies covering loans that are not delinquent.
Loans with more than one of these attributes accounted for 4.4% of our primary risk in force as of December 31, 2022, and 4.1% of our primary risk in force as of December 31, 2021.
Loans with more than one of these attributes accounted for 5% of our primary risk in force as of December 31, 2023, and 4% of our primary risk in force as of December 31, 2022 and December 31, 2021.
Changes in the business practices of Fannie Mae and Freddie Mac's ("the GSEs"), federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses. The substantial majority of our NIW is for loans purchased by the GSEs; therefore, the business practices of the GSEs greatly impact our business.
Changes in the business practices of Fannie Mae and Freddie Mac ("the GSEs"), federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses. The substantial majority of our new insurance written ("NIW") is for loans purchased by the GSEs; therefore, the business practices of the GSEs greatly impact our business.
Approximately 72% of our 2022 and 72% of our 2021 NIW was originated under delegated underwriting programs pursuant to which the loan originators had authority on our behalf to underwrite the loans for our mortgage insurance.
Approximately 71% of our NIW during 2023 and 72% of our 2022 NIW was originated under delegated underwriting programs pursuant to which the loan originators had authority on our behalf to underwrite the loans for our mortgage insurance.
The GSEs (and other investors) have also used other forms of credit enhancement that did not involve traditional private mortgage insurance, such as engaging in credit-linked note transactions executed in the capital markets, or using other forms of debt issuances or securitizations that transfer credit risk directly to other investors, including competitors and an affiliate of MGIC; using other risk mitigation techniques in conjunction MGIC Investment Corporation 2022 Form 10-K | 30 MGIC Investment Corporation and Subsidiaries with reduced levels of private mortgage insurance coverage; or accepting credit risk without credit enhancement.
The GSEs (and other investors) have also used other forms of credit enhancement that did not involve traditional private mortgage insurance, such as engaging in credit-linked note transactions executed in the capital markets, or using other forms of debt issuances or securitizations that transfer credit risk directly to other investors, including competitors and an affiliate of MGIC; using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage; or accepting credit risk without credit enhancement.
Based on our interpretation of the PMIERs, as of December 31, 2022, MGIC’s Available Assets totaled $5.7 billion, or $2.3 billion in excess of its Minimum Required Assets. MGIC is in compliance with the PMIERs and eligible to insure loans purchased by the GSEs.
Based on our interpretation of the PMIERs, as of December 31, 2023, MGIC’s Available Assets totaled $5.8 billion, or $2.4 billion in excess of its Minimum Required Assets. MGIC is in compliance with the PMIERs and eligible to insure loans purchased by the GSEs.
As of December 31, 2022, mortgages with these characteristics in our primary risk in force included mortgages with LTV ratios greater than 95% (15.0%), mortgages with borrowers having FICO scores below 680 (7.2%), including those with borrowers having FICO scores of 620-679 (6.2%), mortgages with limited underwriting, including limited borrower documentation (0.8%), and mortgages with borrowers having DTI ratios greater than 45% (or where no ratio is available) (15.6%), each attribute as determined at the time of loan origination.
As of December 31, 2023, mortgages with these characteristics in our primary risk in force included mortgages with LTV ratios greater than 95% (16%), mortgages with borrowers having FICO scores below 680 (7%), including those with borrowers having FICO scores of 620-679 (6%), mortgages with limited underwriting, including limited borrower documentation (1%), and mortgages with borrowers having DTI ratios greater than 45% (or where no ratio is available) (18%), each attribute is determined at the time of loan origination.
Prevailing market rates have increased for various reasons, including inflationary pressures, which has reduced the fair value of our investment portfolio. The value of our investment portfolio may also be adversely affected by ratings downgrades, increased bankruptcies, and credit spreads widening.
Prevailing market rates have increased for various reasons, including inflationary pressures, which has reduced the fair value of our investment portfolio holdings relative to their amortized cost. The value of our investment portfolio may also be adversely affected by ratings downgrades, increased bankruptcies, and credit spreads widening.
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 generally based on an insurer’s book of risk in force and calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance agreements).
MGIC Investment Corporation 2023 Form 10-K | 28 MGIC Investment Corporation and Subsidiaries 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 generally based on an insurer’s book of risk in force and calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance agreements).
The war has impacted, and may impact, our business in various ways, including the following which are described in more detail in the remainder of these risk factors: • The terms under which we are able to obtain excess-of-loss ("XOL") reinsurance through the insurance-linked notes ("ILN") market and the traditional reinsurance market have been negatively impacted and terms under which we are able to access those markets in the future may be limited or less attractive. • The risk of a cybersecurity incident that affects our company may have increased. • An extended or broadened war may negatively impact the domestic economy, which may increase unemployment and inflation, or decrease home prices, in each case leading to an increase in loan delinquencies. • The volatility in the financial markets may impact the performance of our investment portfolio and our investment portfolio may include investments in companies or securities that are negatively impacted by the war.
Wars and/or other global events have in the past and may continue to impact our business in various ways, including the following which are described in more detail in the remainder of these risk factors: • The terms under which we are able to obtain quota share reinsurance ("QSR") and/or excess-of-loss ("XOL") reinsurance through the insurance-linked notes ("ILN") market and the traditional reinsurance market may be negatively impacted and terms under which we are able to access those markets in the future may be limited or less attractive. • The risk of a cybersecurity incident that affects our company may increase. • Wars may negatively impact the domestic economy, which may increase unemployment and inflation, or decrease home prices, in each case leading to an increase in loan delinquencies. • The volatility in the financial markets may impact the performance of our investment portfolio and our investment portfolio may include investments in companies or securities that are negatively impacted by wars and/or other global events.
These models rely on estimates, projections, and assumptions that are inherently uncertain and may not always operate as intended. This can be especially true when extraordinary events occur, such as the COVID-19 pandemic, the Russia-Ukraine war, periods of extreme inflation, or environmental disasters related to changing climatic conditions. In addition, our models are being continuously updated over time.
These models rely on estimates, projections, and assumptions that are inherently uncertain and may not always operate as intended. This can be especially true when extraordinary events occur, such as wars, periods of extreme inflation, pandemics, or environmental disasters related to changing climatic conditions. In addition, our models are being continuously updated over time.
We believe we currently compete with other private mortgage insurers based on premium rates, underwriting requirements, financial strength (including based on credit or financial strength ratings), customer relationships, name recognition, reputation, strength of management teams and field organizations, the ancillary products and services provided to lenders, and the effective use of technology and innovation in the delivery and servicing of our mortgage insurance products.
We believe we currently compete with other private mortgage insurers based on premium rates, underwriting requirements, financial strength (including based on credit or financial strength ratings), customer relationships, name recognition, reputation, strength of management teams and field organizations, the MGIC Investment Corporation 2023 Form 10-K | 36 MGIC Investment Corporation and Subsidiaries ancillary products and services provided to lenders, and the effective use of technology and innovation in the delivery and servicing of our mortgage insurance products.
The increased use, by the private mortgage insurance industry, of risk-based pricing systems that establish premium rates based on more attributes than previously considered, and of algorithms, artificial intelligence and data and analytics, has led to additional regulatory scrutiny of premium rates and of other matters such as discrimination in pricing and underwriting, data privacy and access to insurance.
The increased use, by the private mortgage insurance industry, of risk-based pricing systems that establish premium MGIC Investment Corporation 2023 Form 10-K | 29 MGIC Investment Corporation and Subsidiaries rates based on more attributes than previously considered, and of algorithms, artificial intelligence and data and analytics, has led to additional regulatory scrutiny of premium rates and of other matters such as discrimination in pricing and underwriting, data privacy and access to insurance.
We could be materially adversely affected by a cyber security breach or failure of information security controls. As part of our business, we maintain large amounts of confidential and proprietary information, including personal information of consumers and employees, on our servers and those of cloud computing services.
We could be materially adversely affected by a cybersecurity breach or failure of information security controls. As part of our business, we maintain large amounts of confidential and proprietary information both on our own servers and those of cloud computing services. This includes personal information of consumers and our employees.
For more information about state capital requirements, see our risk factor titled “ State capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis .” For information about regulation of data privacy, see our risk factor titled “ We could be materially adversely affected by a cyber security breach or failure of information security controls .” For more details about the various ways in which our subsidiaries are regulated, see “Business - Regulation” in Item 1.
For more information about state capital requirements, see our risk factor titled “ State capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis .” For information about regulation of data privacy, see our risk factor titled “ We could be materially adversely affected by a cybersecurity breach or failure of information security controls .” For more details about the various ways in which our subsidiaries are regulated, see “Business - Regulation” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2022.
As a result of these matters, we may not achieve our investment objectives and a reduction in the market value of our investments could have an adverse effect on our liquidity, financial condition and results of operations.
As a result of these matters, we may not achieve our investment objectives and a reduction in the market value of our investments could have an adverse effect on our liquidity, financial condition and results of operations. We carry certain financial instruments at fair value and disclose the fair value of all financial instruments.
Therefore, if our direct risk-in-force increases through increases in NIW, or if our mix of business changes to include loans with higher LTV ratios or lower FICO scores, for example, all other things equal, we will be required to hold more Available Assets in order to maintain GSE eligibility.
Therefore, if our MGIC Investment Corporation 2023 Form 10-K | 34 MGIC Investment Corporation and Subsidiaries direct risk-in-force increases through increases in NIW, or if our mix of business changes to include loans with higher LTV ratios or lower FICO scores, for example, all other things equal, we will be required to hold more Available Assets in order to maintain GSE eligibility.
In addition, from time to time, we are involved in other disputes and legal proceedings in the ordinary course of business. In our opinion, based on the facts known at this time, the ultimate resolution of these ordinary course disputes and legal proceedings will not have a material adverse effect on our financial position or results of operations.
In our opinion, based on the facts known at this time, the ultimate resolution of these ordinary course disputes and legal proceedings will not have a material adverse effect on our financial position or results of operations.
Many of the proposed changes would require Congressional action to implement and it is difficult to estimate when Congressional action would be final and how long any associated phase-in period may last.
For changes that would require Congressional action to implement it is difficult to estimate when Congressional action would be final and how long any associated phase-in period may last.
This may cause liquidity issues, especially for non-bank servicers (who service approximately 46% of the loans underlying our insurance in force as of December 31, 2022) because they do not have the same sources of liquidity that bank servicers have.
This may cause liquidity issues, especially for non-bank servicers (who service approximately 47% of the loans underlying our IIF as of December 31, 2023) because they do not have the same sources of liquidity that bank servicers have.
If the number of loan delinquencies increases for reasons discussed in these risk factors, or otherwise, it may cause our Minimum Required Assets to exceed MGIC Investment Corporation 2022 Form 10-K | 27 MGIC Investment Corporation and Subsidiaries our Available Assets. We are unable to predict the ultimate number of loans that will become delinquent.
If the number of loan delinquencies increases for reasons discussed in these risk factors, or otherwise, it may cause our Minimum Required Assets to exceed our Available Assets. We are unable to predict the ultimate number of loans that will become delinquent.
A higher than expected persistency rate may decrease the profitability from single premium policies because they will remain in force longer and may increase the incidence of claims that was estimated when the policies were written.
A higher than expected persistency rate may decrease the profitability from single premium policies because they will remain in force longer and may increase the incidence of claims that was MGIC Investment Corporation 2023 Form 10-K | 32 MGIC Investment Corporation and Subsidiaries estimated when the policies were written.
Our ability to efficiently operate our business depends significantly on the reliability and capacity of our systems and technology. The failure of our systems and technology to operate effectively could affect our ability to provide our products and services to customers, reduce efficiency, or cause delays in operations. Significant capital investments might be required to remediate any such problems.
The failure of our systems and technology, or our disaster recovery and business continuity plans, to operate effectively could affect our ability to provide our products and services to customers, reduce efficiency, or cause delays in operations. Significant capital investments might be required to remediate any such problems.
PMIERs credit is generally not given for the reinsured risk above the PMIERs requirement. The GSEs have discretion to further limit reinsurance credit under the PMIERs. Refer to “Consolidated Results of Operations – Reinsurance Transactions” in Part 7 for information about the calculated PMIERs credit for our XOL transactions.
PMIERs credit is generally not given for the reinsured risk above the PMIERs requirement. The GSEs have discretion to further limit reinsurance credit under the PMIERs. Refer to “Consolidated Results of Operations – Reinsurance Transactions” in Part I, Item 2 of our Quarterly Report on Form 10-Q for information about the calculated PMIERs credit for our XOL transactions.
Generally, the longer a loan is delinquent before a claim is received, the greater the severity. As a result of foreclosure moratoriums and forbearance programs related to COVID-19, the average time it takes to receive claims has increased. Economic conditions may differ from region to region.
Generally, the longer a loan is delinquent before a claim is received, the greater the severity. Foreclosure moratoriums and forbearance programs increase the average time it takes to receive claims. Economic conditions may differ from region to region.
Home Price Index of the Federal Housing Finance Agency (the “FHFA”), which is based on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac, indicates that home prices fell 0.1% nationwide in November, 2022 compared to October, 2022.
The seasonally-adjusted Purchase-Only U.S. Home Price Index of the Federal Housing Finance Agency (the “FHFA”), which is based on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac, indicates that home prices increased 0.3% nationwide in November, 2023 compared to October, 2023.
High levels of unemployment may result in an increasing number of loan delinquencies and an increasing number of insurance claims; however, unemployment is difficult to predict given the uncertainty in the current market environment, including as a result of global events such as the COVID-19 pandemic, the Russia-Ukraine war, and the possibility of an economic recession.
High levels of unemployment may result in an increasing number of loan delinquencies and an increasing number of insurance claims; however, unemployment is difficult to predict given the uncertainty in the current market environment, including as a result of global events such as wars, instability in the financial services industry, and the possibility of an economic recession.
When home prices increase, interest rates increase and/or the percentage of our NIW from purchase transactions increases, our NIW on mortgages with higher LTV ratios and higher DTI ratios may increase.
When home prices increase, interest rates increase and/or the percentage of our NIW from purchase transactions increases, our NIW on mortgages with higher LTV ratios and higher DTI ratios may increase. Our NIW on mortgages with LTV ratios greater than 95% was 12% in 2023 and 2022.
In June 2022 the GSEs each published their Equitable Housing Finance Plans. The Plans seek to advance equity in housing finance over a three year period and include potential changes to the GSEs’ business practices and policies.
In 2022 the GSEs each published Equitable Housing Finance Plans ("Plans"). Updated Plans were subsequently published by each GSE in April 2023. The Plans seek to advance equity in housing finance over a three-year period and include potential changes to the GSEs’ business practices and policies.
While these proceedings in the aggregate did not result in material liability for MGIC, there can be no assurance that the outcome of future proceedings, if any, under these laws or others would not have a material adverse effect on us.
While these proceedings in the aggregate did not result in material liability for MGIC, there can be no assurance that the outcome of future proceedings, if any, under these laws or others would not have a material adverse effect on us. We provide contract underwriting services, including on loans for which we are not providing mortgage insurance.
Such attacks may also increase as a result of retaliation by Russia in response to actions taken by the U.S. and other countries in connection with Russia's military invasion of Ukraine. The Company operates under a hybrid workforce model and such model may be more vulnerable to security breaches.
Such attacks may also increase as a result of retaliation by threat actors against actions taken by the U.S. and other countries in connection with wars and other global events. The Company operates under a hybrid workforce model and such model may be more vulnerable to security breaches.
In addition, business under customized rate plans is awarded by certain customers for only limited periods of time. As a result, our NIW may fluctuate more than it had in the past.
In addition, business under customized rate plans is awarded by certain customers for only limited periods of time. As a result, our NIW may fluctuate more than it had in the past. Failure to maintain our business relationships and business volumes with our largest customers could materially impact our business.
As a result, they reduce the capital that we are required to hold to support the risk and they allow us to earn higher returns on our business than we would without them.
As a result, they reduce the risk-based capital that we are required to hold to support the risk and they allow us to earn higher returns on risk-based capital for our business than we would without them. However, market conditions impact the availability and cost of reinsurance.
In each year, most of our premiums earned are from insurance that has been written in prior years. As a result, the length of time insurance remains in force, which is generally measured by persistency (the percentage of our insurance remaining in force from one year prior), is a significant determinant of our revenues.
As a result, the length of time insurance remains in force, which is generally measured by persistency (the percentage of our insurance remaining in force from one year prior), is a significant determinant of our revenues.
It is uncertain what role the GSEs, FHA and private capital, including private mortgage insurance, will play in the residential housing finance system in the future. The timing and impact on our business of any resulting changes are uncertain.
The GSEs also possess substantial market power, which enables them to influence our business and the mortgage insurance industry in general. It is uncertain what role the GSEs, FHA and private capital, including private mortgage insurance, will play in the residential housing finance system in the future. The timing and impact on our business of any resulting changes are uncertain.
MGIC Investment Corporation 2022 Form 10-K | 28 MGIC Investment Corporation and Subsidiaries Pandemics, hurricanes and other natural disasters may impact our incurred losses, the amount and timing of paid claims, our inventory of notices of default and our Minimum Required Assets under PMIERs.
Pandemics, hurricanes and other disasters may impact our incurred losses, the amount and timing of paid claims, our inventory of notices of default and our Minimum Required Assets under PMIERs.
Our NIW on mortgages with LTV ratios greater than 95% increased from 11% in 2021 to 12% in 2022 and our NIW on mortgages with DTI ratios greater than 45% increased from 14% in 2021 to 21% in 2022. From time to time, we change the processes we use to underwrite loans.
Our NIW on mortgages with DTI ratios greater than 45% was 26% in 2023 and 21% in 2022. From time to time, we change the processes we use to underwrite loans.
This may cause us to retain more risk than we otherwise would retain and could negatively affect our compliance with the financial requirements of State Capital Requirements and the PMIERs.
Pandemics and other disasters could also lead to increased reinsurance rates or reduced availability of reinsurance. This may cause us to retain more risk than we otherwise would retain and could negatively affect our compliance with the financial requirements of State Capital Requirements and the PMIERs.
The increased role that the federal government has assumed in the residential housing finance system through the GSE conservatorships may increase the likelihood that the business practices of the GSEs change, including through administrative action, in ways that have a material adverse effect on us and that the charters of the GSEs are changed by new federal legislation.
The increased role that the federal government has assumed in the residential housing finance system through the GSE conservatorships may increase the likelihood that the business practices of the GSEs change, including through administration changes and actions. Such changes could have a material adverse effect on us.
The 12 month change in home prices remains at historically high rates, but the rate of growth is moderating: it increased by 6.7% in the first eleven months of 2022, after increasing 17.9%, 11.7%, and 5.9% in 2021, 2020 and 2019, respectively.
Although the 12 month change in home prices recently reached historically high rates, the rate of growth is moderating: it increased by 6.5% in the first eleven months of 2023, after increasing 6.8%, and 17.8% in 2022 and 2021, respectively.
Pandemics and other natural disasters, such as hurricanes, tornadoes, earthquakes, wildfires and floods, or other events related to changing climatic conditions, could trigger an economic downturn in the affected areas, or in areas with similar risks, which could result in a decline in our business and an increased claim rate on policies in those areas.
Pandemics and other disasters, such as hurricanes, tornadoes, earthquakes, wildfires and floods, or other events related to climate change, could trigger an economic downturn in the affected areas, or in areas with similar risks, which could result in a decrease in home prices and an increased claim rate and claim severity in those areas.
Refer to Part 8, Note 9 – “Reinsurance” and Part 7 “Consolidated Results of Operations – Reinsurance Transactions” for more information about coverage under our reinsurance transactions. The reinsurance transactions reduce the tail-risk associated with stress scenarios.
Refer to Part 1, Note 4 – “Reinsurance” and Part 1, Item 2 “Consolidated Results of Operations – Reinsurance Transactions” of our Quarterly Report on Form 10-Q, for more information about coverage under our reinsurance transactions. The reinsurance transactions reduce the tail-risk associated with stress scenarios.
For other factors that could decrease the demand for mortgage insurance, see our risk factor titled “The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance.” The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance.
For other factors that could decrease the demand for mortgage insurance, see our risk factor titled “The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance or are unable to obtain capital relief for mortgage insurance.” MGIC Investment Corporation 2023 Form 10-K | 31 MGIC Investment Corporation and Subsidiaries The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance or are unable to obtain capital relief for mortgage insurance.
We are in the process of upgrading certain information systems, and transforming and automating certain business processes, and we continue to enhance our risk-based pricing system and our system for evaluating risk. Certain information systems have been in place for a number of years and it has become increasingly difficult to support their operation.
From time to time we upgrade, automate or otherwise transform our information systems, business processes, risk-based pricing system, and our system for evaluating risk. Certain information systems have been in place for a number of years and it has become increasingly difficult to support their operation.
Our enterprise risk management program, described in "Business - Our Products and Services - Risk Management" in Item 1, may not be effective in identifying, or adequate in controlling or mitigating, the risks we face in our business.
Our enterprise risk management program, described in "Business - Our Products and Services - Risk Management" in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2023, may not be effective in identifying, or adequate in controlling or mitigating, the risks we face in our business.
Specifically relating to mortgage insurance, (1) Fannie Mae’s Plan contemplates the creation of special purchase credit program(s) ("SPCPs") targeted to historically underserved borrowers with a goal of lowering costs for such borrowers through lower than standard mortgage insurance requirements; and (2) Freddie Mac’s Plan contemplates the creation of SPCPs targeted to historically underserved borrowers with the goals of (a) working with mortgage insurers to reduce costs for high LTV borrowers, and (b) updating mortgage insurance cancellation requirements.
Specifically relating to mortgage insurance, (1) Fannie Mae’s Plan includes the creation of special purpose credit program(s) ("SPCPs") targeted to historically underserved borrowers with a goal of lowering costs for such borrowers through lower than standard mortgage insurance requirements; and (2) Freddie Mac’s Plan includes plans to work with mortgage insurers to look for ways to lower mortgage costs, the creation of SPCPs targeted to historically underserved borrowers, and the planned purchase of loans originated through lender-created SPCPs.
The FHA's share of the low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance was 26.7% in 2022, 24.7% in 2021, and 23.4% in 2020. Beginning in 2012, the FHA’s share has been as low as 23.4% (in 2020) and as high as 42.1% (in 2012).
The VA's share of the low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance was 21.5% in 2023, 24.5% in 2022, and 30.2% in 2021. Beginning in 2012, the VA’s share has been as low as 22.8% (in 2013) and as high as 30.9% (in 2020).
Moreover, we may use information we receive through enhancements to refine or otherwise change existing assumptions and/or methodologies. Information technology system failures or interruptions may materially impact our operations and adversely affect our financial results. We are heavily dependent on our information technology systems to conduct our business.
The risks related to our models may increase when we change assumptions, methodologies, or modeling platforms. Moreover, we may use information we receive through enhancements to refine or otherwise change existing assumptions and/or methodologies. Information technology system failures or interruptions may materially impact our operations and/or adversely affect our financial results.
In addition, the inability of a borrower to obtain hazard and/or flood insurance, or the increased cost of such insurance, could lead to an increase in delinquencies or a decrease in home prices in the affected areas.
Even though we do not generally insure losses related to property damage, the inability of a borrower to obtain hazard and/or flood insurance, or the increased cost of such insurance, could lead to a decrease in home prices in the affected areas and an increase in delinquencies and our incurred losses.
As a result, they may be able to achieve higher after-tax rates of return on their NIW compared to us, which could allow them to leverage reduced premium rates to gain market share, and they may be better positioned to compete outside of traditional mortgage insurance, including by participating in alternative forms of credit enhancement pursued by the GSEs discussed in our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance ." Although the current PMIERs of the GSEs do not require an insurer to maintain minimum financial strength ratings, our financial strength ratings can affect us in the ways set forth below.
As a result, they may be able to achieve higher after-tax rates of return on their NIW compared to us, which could allow them to leverage reduced premium rates to gain market share, and they may be better positioned to compete outside of traditional mortgage insurance, including by participating in alternative forms of credit enhancement pursued by the GSEs discussed in our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance or are unable to obtain capital relief for mortgage insurance ." Adverse rating agency actions could have a material adverse impact on our business, results of operations and financial condition.
A low persistency rate on monthly and annual premium policies will reduce future premiums but may also reduce the incidence of claims, while a high persistency on those policies will increase future premiums but may increase the incidence of claims. Our persistency rate was 79.8% at December 31, 2022, 62.6% at December 31, 2021, and 60.5% at December 31, 2020.
A low persistency rate on monthly and annual premium policies will reduce future premiums but may also reduce the incidence of claims, while a high persistency on those policies will increase future premiums but may increase the incidence of claims.
Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that will hinder the Company’s ability to identify, investigate and recover from incidents.
We could be similarly affected by threats against our vendors and/or third-parties with whom we share information. Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that may hinder the Company’s ability to identify, investigate and recover from incidents.
The national average price-to-income ratio exceeds its historical average, in part as a result of recent home price appreciation outpacing increases in income. Affordability issues and the significant increase in interest rates in recent months has put downward pressure on home prices. Recent third-party forecasts predict that home prices will decline further.
The national average price-to-income ratio exceeds its historical average, in part as a result of recent home price appreciation outpacing increases in income. Affordability issues can put downward pressure on home prices.
MGIC Investment Corporation 2022 Form 10-K | 32 MGIC Investment Corporation and Subsidiaries The mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring.
Our underwriting practices and the mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring.
Under ASC 450-20, until a loss associated with settlement discussions or legal proceedings becomes probable and can be reasonably estimated, we consider our claim payment or rescission resolved for financial reporting purposes and do not accrue an estimated loss.
Under ASC 450-20, until a loss associated with settlement discussions or legal proceedings becomes probable and can be reasonably estimated, we do not accrue an estimated loss. When we determine that a loss is probable and can be reasonably estimated, we record our best estimate of our probable loss.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePrior to his becoming Controller, he was Assistant Controller of MGIC beginning in 2007 and prior to that was a manager in MGIC’s accounting department. Before joining MGIC, Mr. Mattke was with PricewaterhouseCoopers LLP, the Company’s independent registered accounting firm. Mr. Miosi has served as our President and Chief Operating Officer since 2019.
Biggest changeBefore then, he had been the Company’s Chief Financial Officer from 2014 to 2019, and its Controller from 2009 to 2014. He joined the Company in 2006. Prior to his becoming Controller, he was Assistant Controller of MGIC beginning in 2007 and prior to that was a manager in MGIC’s accounting department. Before joining MGIC, Mr.
Item 4. Mine Safety Disclosures Not Applicable. MGIC Investment Corporation 2022 Form 10-K | 38 MGIC Investment Corporation and Subsidiaries Information About Our Executive Officers Certain information with respect to our executive officers as of February 22, 2023 is set forth below: Executive officers of the registrant Name and Age Title Timothy J.
Item 4. Mine Safety Disclosures Not Applicable. MGIC Investment Corporation 2023 Form 10-K | 41 MGIC Investment Corporation and Subsidiaries Information About Our Executive Officers Certain information with respect to our executive officers as of February 21, 2024 is set forth below: Executive officers of the registrant Name and Age Title Timothy J.
Mattke, 47 Chief Executive Officer and Director of MGIC Investment Corporation and MGIC Salvatore A. Miosi, 56 President and Chief Operating Officer of MGIC Investment Corporation and MGIC Nathan H. Colson, 39 Executive Vice President and Chief Financial Officer of MGIC Investment Corporation and MGIC James J.
Mattke, 48 Chief Executive Officer and Director of MGIC Investment Corporation and MGIC Salvatore A. Miosi, 57 President and Chief Operating Officer of MGIC Investment Corporation and MGIC Nathan H. Colson, 40 Executive Vice President and Chief Financial Officer of MGIC Investment Corporation and MGIC Paula C.
Miosi joined the company in 1988 and has also held a variety of leadership positions in the operations, technology and marketing divisions. Mr. Colson has served as our Executive Vice President and Chief Financial Officer since 2019. Before then, he had been MGIC's Vice President – Finance during 2019 and its Assistant Treasurer from 2016 to 2019.
Colson has served as our Executive Vice President and Chief Financial Officer since 2019. Before then, he had been MGIC's Vice President – Finance during 2019 and its Assistant Treasurer from 2016 to 2019. He joined MGIC in 2014 and prior to becoming Assistant Treasurer, he held positions in its Risk Management Department. Before joining MGIC, Mr.
Maggio joined the Company in 2018 and has served as Executive Vice President, General Counsel and Secretary since then. Prior to joining the Company, Ms. Maggio had been Executive Vice President, General Counsel and Secretary of Retail Properties of America, Inc. from 2016 to 2018, Executive Vice President, General Counsel and Secretary of Strategic Hotels & Resorts, Inc.
Maggio had been Executive Vice President, General Counsel and Secretary of Retail Properties of America, Inc. from 2016 to 2018, Executive Vice President, General Counsel and Secretary of Strategic Hotels & Resorts, Inc. (SHR) from 2012 to 2015, and in various other leadership roles with SHR since joining that firm in 2000. Prior to joining SHR, Ms.
Hughes, 60 Executive Vice President – Sales and Business Development of MGIC Paula C. Maggio, 54 Executive Vice President, General Counsel and Secretary of MGIC Investment Corporation and MGIC Steven M. Thompson, 60 Executive Vice President and Chief Risk Officer of MGIC Robert J. Candelmo, 59 Senior Vice President and Chief Information Officer of MGIC Mr.
Maggio, 55 Executive Vice President, General Counsel and Secretary of MGIC Investment Corporation and MGIC Steven M. Thompson, 61 Executive Vice President and Chief Risk Officer of MGIC Robert J. Candelmo, 60 Senior Vice President and Chief Information Officer of MGIC Mr. Mattke has served as our Chief Executive Officer since 2019.
(SHR) from 2012 to 2015, and in various other leadership roles with SHR since joining that firm in 2000. Prior to joining SHR, Ms. Maggio had been in private legal practice from 1994-2000. Mr. Thompson has served as MGIC's Executive Vice President and Chief Risk Officer since 2019.
Maggio had been in private legal practice from 1994-2000. Mr. Thompson has served as MGIC's Executive Vice President and Chief Risk Officer since 2019. Before then, he had been Interim Chief Risk Officer during 2019, and Vice President Credit Policy and Pricing from 2016 to 2019.
Candelmo has served as MGIC's Senior Vice President and Chief Information Officer since 2019. He joined MGIC in 2014 as its Vice President – Chief Technology Officer. Prior to joining MGIC, Mr. Candelmo had been Senior Vice President of Enterprise Information Services with SunTrust Bank since 2008. Prior to joining SunTrust, Mr.
Colson will assume responsibility for overseeing the Risk Management Department upon Mr. Thompson's retirement. Mr. Candelmo has served as MGIC's Senior Vice President and Chief Information Officer since 2019. He joined MGIC in 2014 as its Vice President – Chief Technology Officer. Prior to joining MGIC, Mr.
Before then, he had been Interim Chief Risk Officer during 2019, and Vice President Credit Policy and Pricing from 2016 to 2019. He joined MGIC in 1998 and prior to being named Vice President Credit Policy and Pricing, he held several management positions in its Risk Management Department, including Vice President – Risk Management from 2000 to 2016. Mr.
He joined MGIC in 1998 and prior to being named Vice President Credit Policy and Pricing, he held several management positions in its Risk Management Department, including Vice President – Risk Management from 2000 to 2016. On November 6, 2023, Mr. Thompson provided notice of his intent to retire, effective March 22, 2024. Mr.
Candelmo had held various other leadership roles within the information technology discipline. MGIC Investment Corporation 2022 Form 10-K | 39 MGIC Investment Corporation and Subsidiaries PART II
Candelmo had been Senior Vice President of Enterprise Information Services with SunTrust Bank since 2008. Prior to joining SunTrust, Mr. Candelmo had held various other leadership roles within the information technology discipline. MGIC Investment Corporation 2023 Form 10-K | 42 MGIC Investment Corporation and Subsidiaries PART II
Before then, he had been Executive Vice President – Business Strategy and Operations since 2017. He served as Senior Vice President – Business Strategy and Operations of MGIC from 2015 to 2017, and Vice President – Marketing from 2004 to 2015. Mr.
He served as Senior Vice President – Business Strategy and Operations of MGIC from 2015 to 2017, and Vice President – Marketing from 2004 to 2015. Mr. Miosi joined the company in 1988 and has also held a variety of leadership positions in the operations, technology and marketing divisions. Mr.
He joined MGIC in 2014 and prior to becoming Assistant Treasurer, he held positions in its Risk Management Department. Before joining MGIC, Mr. Colson was with PricewaterhouseCoopers LLP, the Company’s independent registered accounting firm. Mr. Hughes has served as Executive Vice President – Sales and Business Development of MGIC since 2017.
Colson was with PricewaterhouseCoopers LLP, the Company’s independent registered accounting firm. Ms. Maggio joined the Company in 2018 and has served as Executive Vice President, General Counsel and Secretary since then. Prior to joining the Company, Ms.
Mattke has served as our Chief Executive Officer since 2019. Before then, he had been the Company’s Chief Financial Officer from 2014 to 2019, and its Controller from 2009 to 2014. He joined the Company in 2006.
Mattke was with PricewaterhouseCoopers LLP, the Company’s independent registered accounting firm. Mr. Miosi has served as our President and Chief Operating Officer since 2019. Before then, he had been Executive Vice President – Business Strategy and Operations since 2017.
Removed
He served as Senior Vice President – Sales and Business Development of MGIC from 2015 to 2017, and Vice President, Managing Director in the sales area from 2001 to 2015. He joined MGIC in 1987 and prior to becoming Vice President, Managing Director, he had been an Account Manager and a Sales Manager. On January 17, 2023 Mr.
Removed
Hughes provided notice of his intent to retire, effective August 1, 2023. On April 1, 2023 Mr. Hughes will step down from his role as Executive Vice-President - Sales and Business Development and serve as a Special Advisor to the CEO until his retirement date. Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShare repurchases Period Beginning Period Ending Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the program (1) October 1, 2022 October 31, 2022 2,564,592 $ 12.96 2,564,592 $ 160,583,743 November 1, 2022 November 30, 2022 1,770,926 $ 13.49 1,770,926 $ 136,687,570 December 1, 2022 December 31, 2022 1,720,794 $ 13.02 1,720,794 $ 114,286,213 6,056,312 $ 13.13 6,056,312 (1) In October 2021, our Board of Directors authorized a share repurchase program under which as of December 31, 2022 we may repurchase up to an additional $114 million of our common stock through the end of 2023.
Biggest changeShare repurchases Period Beginning Period Ending Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the program (1) 10/1/2023 10/31/2023 2,627,520 $ 16.86 2,627,520 $ 352,143,837 11/1/2023 11/30/2023 2,372,521 $ 17.48 2,372,521 $ 310,661,722 12/1/2023 12/31/2023 1,982,517 $ 18.63 1,982,517 $ 273,735,272 6,982,558 $ 17.57 6,982,558 (1) In April 2023, our Board of Directors authorized a share repurchase program under which as of December 31, 2023 we may repurchase up to an additional $274 million of our common stock through July 1, 2025.
Repurchases may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. The repurchase program may be suspended for periods or discontinued at any time. MGIC Investment Corporation 2022 Form 10-K | 40 MGIC Investment Corporation and Subsidiaries
Repurchases may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. The repurchase program may be suspended for periods or discontinued at any time. MGIC Investment Corporation 2023 Form 10-K | 43 MGIC Investment Corporation and Subsidiaries
In addition, we estimate there are approximately 75,654 beneficial owners of shares held by brokers and fiduciaries. Information regarding equity compensation plans is contained in Item 12 . (b) Not applicable. (c) Issuer Purchases of Equity Securities The following table provides information about purchases of MGIC Investment Corporation common stock by us during the three months ended December 31, 2022.
In addition, we estimate there are approximately 90,250 beneficial owners of shares held by brokers and fiduciaries. Information regarding equity compensation plans is contained in Item 12 . (b) Not applicable. (c) Issuer Purchases of Equity Securities The following table provides information about purchases of MGIC Investment Corporation common stock by us during the three months ended December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Our Common Stock is listed on the New York Stock Exchange under the symbol “MTG.” As of February 17, 2023, the number of shareholders of record was 274.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Our Common Stock is listed on the New York Stock Exchange under the symbol “MTG.” As of February 16, 2024, the number of shareholders of record was 177.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSummary of financial results of MGIC Investment Corporation Year Ended December 31, (in millions, except per share data) 2022 2021 Change Selected statement of operations data Net premiums earned $ 1,007.1 $ 1,014.4 (1) % Investment income, net of expenses 167.5 156.4 7 % Losses incurred, net (254.6) 64.6 N/M Other underwriting and operating expenses, net 236.7 198.4 19 % Loss on debt extinguishment 40.2 36.9 9 % Income before tax 1,090.0 801.8 36 % Provision for income taxes 224.7 166.8 35 % Net income 865.3 635.0 36 % Diluted income per share $ 2.79 $ 1.85 51 % Non-GAAP Financial Measures (1) Adjusted pre-tax operating income $ 1,140.0 $ 831.7 37 % Adjusted net operating income 904.8 658.6 37 % Adjusted net operating income per diluted share $ 2.91 $ 1.91 52 % (1) See "Explanation and Reconciliation of our use of Non-GAAP Financial Measures." SUMMARY OF 2022 FINANCIAL RESULTS Net income of $865.3 million for 2022 increased by $230.4 million when compared to the prior year, and diluted income per share of $2.79 increased by 51% when compared to the prior year.
Biggest changeSummary of financial results of MGIC Investment Corporation Year Ended December 31, (in millions, except per share data) 2023 2022 Change Selected statement of operations data Net premiums earned $ 952.6 $ 1,007.1 (5) % Investment income, net of expenses 214.7 167.5 28 % Losses incurred, net (20.9) (254.6) (92) % Other underwriting and operating expenses, net 226.0 236.7 (5) % Loss on debt extinguishment — 40.2 N/M Income before tax 902.2 1,090.0 (17) % Provision for income taxes 189.3 224.7 (16) % Net income 712.9 865.3 (18) % Diluted income per share $ 2.49 $ 2.79 (11) % Non-GAAP Financial Measures (1) Adjusted pre-tax operating income $ 917.8 $ 1,140.0 (19) % Adjusted net operating income 724.4 904.8 (20) % Adjusted net operating income per diluted share $ 2.53 $ 2.91 (13) % (1) See "Explanation and Reconciliation of our use of Non-GAAP Financial Measures." SUMMARY OF 2023 FINANCIAL RESULTS Net income for 2023 was $712.9 million (2022: $865.3 million) and diluted income per share was $2.49 (2022: $2.79).
Losses incurred are generally affected by: • The state of the economy, including unemployment and housing values, each of which affects the likelihood that loans will become delinquent and whether loans that are delinquent cure their delinquency. • The product mix of the in force book, with loans having higher risk characteristics generally resulting in higher delinquencies and claims. • The size of loans insured, with higher average loan amounts tending to increase incurred losses. • The percentage of coverage on insured loans, with deeper average coverage tending to increase incurred losses. • The rate at which we rescind policies or curtail claims.
Losses incurred are generally affected by: • The state of the economy, including unemployment and housing values, each of which affects the likelihood that loans will become delinquent and whether loans that are delinquent cure their delinquency. • The product mix of the in force book, with loans having higher risk characteristics generally resulting in higher delinquencies and claims. • The size of loans insured, with higher average loan amounts on delinquent loans tending to increase incurred losses. • The percentage of coverage on insured loans, with deeper average coverage on delinquent loans tending to increase incurred losses. • The rate at which we rescind policies or curtail claims.
For additional information about our IT systems and cybersecurity, see our risk factor titled “ Information technology system failures or interruptions may materially impact our operations and adversely affect our financial results " and " We could be materially adversely affected by a cyber security breach or failure of information security controls. " in Item 1A .
For additional information about our IT systems and cybersecurity, see our risk factor titled “ Information technology system failures or interruptions may materially impact our operations and adversely affect our financial results " and " We could be materially adversely affected by a cyber security breach or failure of information security controls. " in Item 1A and
Historically, the first few years after loans are originated are a period of relatively low claims, with claims increasing substantially for several years subsequent and then declining, although persistency, the condition of the economy, including unemployment and housing prices, and other factors can affect this pattern.
Historically, the first few years after loans are originated are a period of relatively low claims, with claims increasing substantially for several years subsequent and then declining, although annual persistency, the condition of the economy, including unemployment and housing prices, and other factors can affect this pattern.
Comparisons between 2021 and 2020 have been omitted from this Form 10-K, but can be found in "Item 7 - 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, 2021 filed with the SEC.
Comparisons between 2022 and 2021 have been omitted from this Form 10-K, but can be found in "Item 7 - 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, 2022 filed with the SEC.
For additional information about the business practices of the GSEs, see our Risk Factor titled “Changes in the business practices of Fannie Mae and Freddie Mac's ("the GSEs"), federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses . ” in Item 1A .
For additional information about the business practices of the GSEs, see our Risk Factor titled “Changes in the business practices of Fannie Mae and Freddie Mac ("the GSEs"), federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses . ” in Item 1A .
The amount received on the sale of fixed income securities is affected by the coupon rate of the security compared to the yield of comparable securities at the time of sale. • Equity securities. Investment gains and losses are accounted for as a function of the periodic change in fair value. • Financial instruments.
The amount received on the sale of fixed income securities is affected by the coupon rate of the security compared to the yield of comparable securities at the time of sale. • Equity securities. Investment gains and losses are accounted for as a function of the periodic change in fair value.
Our net premiums written and earned are primarily impacted by the changes in the direct premiums written and earned noted above and by the amount of premiums we cede under our quota share and excess of loss reinsurance transactions. The amount of premiums we cede in 2023 will be affected by any changes in our reinsurance coverage.
Our net premiums written and earned are primarily impacted by the changes in the direct premiums written and earned noted above and by the amount of premiums we cede under our quota share and excess of loss reinsurance transactions. The amount of premiums we cede in 2024 will be affected by any changes in our reinsurance coverage.
LOSS ON DEBT EXTINGUISHMENT In 2022, we recorded a loss on debt extinguishment of $40.2 million, related to the repurchases of a portion our 9% Debentures, the redemption of our 5.75% Senior Notes, and the repayment of the outstanding principal balance of the FHLB Advance.
In 2022, we recorded a loss on debt extinguishment of $40.2 million, related to the repurchase of a portion of our 9% Debentures, the redemption of our 5.75% Senior Notes, and the repayment of the outstanding principal balance of our FHLB advance.
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 ” in Item 1A for more information about matters that could negatively affect such compliance.
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 ” in Item 1A for more information about matters that could negatively impact our compliance with State Capital Requirements.
The following is a discussion and analysis of the financial conditions and results of operations for the years ended December 31, 2022 and 2021, including comparisons between 2022 and 2021.
The following is a discussion and analysis of the financial conditions and results of operations for the years ended December 31, 2023 and 2022, including comparisons between 2023 and 2022.
MGIC Investment Corporation 2022 Form 10-K | 42 OVERVIEW This Overview of the MD&A highlights selected information and may not contain all of the information that is important to readers of this Annual Report. Hence, this Overview is qualified by the information that appears elsewhere in this Annual Report, including the other portions of the MD&A.
MGIC Investment Corporation 2023 Form 10-K | 45 OVERVIEW This Overview of the MD&A highlights selected information and may not contain all of the information that is important to readers of this Annual Report. Hence, this Overview is qualified by the information that appears elsewhere in this Annual Report, including the other portions of the MD&A.
Pricing practices In recent years, the industry has materially reduced its use of standard rate cards, which were fairly consistent among competitors, and correspondingly increased its use of (i) "risk-based pricing systems" that use a spectrum of filed rates to allow for formulaic, risk-based pricing based on multiple attributes that may be quickly adjusted within certain parameters, and (ii) customized rate plans, both of which typically have rates lower than the standard rate card.
Pricing practices In recent years, the industry has materially reduced its use of standard rate cards, which were fairly consistent among competitors, and correspondingly increased its use of (i) "risk-based pricing systems" that use a spectrum of filed rates to allow for formulaic, risk-based pricing based on multiple attributes that may be quickly adjusted within certain parameters, and (ii) customized rate plans.
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, including the COVID-19 pandemic, may result in delinquencies not following the typical pattern.
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.
Through MGIC, the principal subsidiary of MGIC Investment Corporation, we serve 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, 2022 MGIC had $295.3 billion of primary IIF.
Through MGIC, the principal subsidiary of MGIC Investment Corporation, we serve 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 IIF.
Due to our reliance on information technology systems, including ours and those of our customers and third-party service providers, and to the sensitivity of the information that we maintain, unauthorized access to the systems or disclosure of the information could adversely affect our reputation, severely disrupt our operations, result in a loss of business and expose us to material claims for damages and may require that we provide MGIC Investment Corporation 2022 Form 10-K | 49 MGIC Investment Corporation and Subsidiaries free credit monitoring services to individuals affected by a security breach.
Due to our reliance on information technology systems, including ours and those of our customers and third-party service providers, and to the sensitivity of the information that we maintain, unauthorized access to the systems or disclosure of the information could adversely affect our reputation, severely disrupt our operations, result in a loss of business and expose us to material claims for damages and may require that we provide free credit monitoring services to individuals affected by a security breach.
For the possible effects of such changes, see our risk factors titled " If the volume of low down payment home mortgage originations declines, the amount of insurance that we write could decline ,” “ 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, ” and “ Changes in interest rates, house prices or mortgage insurance cancellation requirements may change the length of time that our policies remain in force ." Mortgage insurance market The past several years of favorable housing fundamentals and in our view, generally favorable risk characteristics of our recently insured loans contributed to a growing insurance in force.
For information about the possible effects of such changes, see our risk factors titled " If the volume of low down payment home mortgage originations declines, the amount of insurance that we write could decline ,” “ 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, ” and “ Changes in interest rates, house prices or mortgage insurance cancellation requirements may change the length of time that our policies remain in force ." Mortgage insurance market The strong credit quality of our insurance portfolio reflects several years of favorable housing fundamentals and in our view, generally favorable risk characteristics on our recently insured loans.
Premiums earned are also impacted by the amount of accelerated premiums from single premium policy cancellations, which generally decrease as refinance activity decreases. Our unearned premium decreased to $195.3 million at December 31, 2022 from $241.7 million at December 31, 2021.
Premiums earned are also impacted by the amount of accelerated premiums from single premium policy cancellations, which generally decrease as refinance activity decreases. Our unearned premium decreased to $157.8 million at December 31, 2023 from $195.3 million at December 31, 2022.
For information about possible effects, please refer to our Risk Factor titled “ Pandemics, hurricanes and other natural disasters may impact our incurred losses, the amount and timing of paid claims, our inventory of notices of default and our Minimum Required Assets under PMIERs. ” MGIC Investment Corporation 2022 Form 10-K | 47 MGIC Investment Corporation and Subsidiaries Our results of operations are affected by: Premiums written and earned Premiums written and earned in a year are influenced by: • NIW, which increases IIF.
For information about possible effects, please refer to our Risk Factor titled “ Pandemics, hurricanes and other disasters may impact our incurred losses, the amount and timing of paid claims, our inventory of notices of default and our Minimum Required Assets under PMIERs. ” Our results of operations are affected by: Premiums written and earned Premiums written and earned in a year are influenced by: • NIW, which increases IIF.
For example, a weak economy or housing MGIC Investment Corporation 2022 Form 10-K | 48 MGIC Investment Corporation and Subsidiaries value declines can lead to claims from older books increasing, continuing at stable levels or experiencing a lower rate of decline. See further information under “Mortgage insurance earnings and cash flow cycle” below. • Losses ceded under reinsurance transactions.
For example, a weak economy or housing value declines can lead to claims from older books increasing, continuing at stable levels or experiencing a lower rate of decline. See further information under “Mortgage insurance earnings and cash flow cycle” below. • Losses ceded under reinsurance transactions.
Loss 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.
Loss on debt extinguishment Gains and losses on debt extinguishment result from discretionary activities that are undertaken to enhance our capital position and / or improve our debt profile.
In 2023, MGIC could pay $92 million of ordinary dividends without OCI approval, before taking into consideration dividends paid in the preceding twelve months. In 2022 and 2021, MGIC paid a cash and/or investment security dividend of $800 million and $400 million, respectively, to our holding company.
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 2023 and 2022, MGIC paid a cash and/or investment security dividend of $600 million and $800 million, respectively, to our holding company.
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 generally based on an insurer’s book of risk in force and are calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance transactions).
MGIC Investment Corporation 2023 Form 10-K | 49 MGIC Investment Corporation and Subsidiaries 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 and are 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).
We expect net investment income in 2023 to increase in comparison to 2022, primarily due to higher average investment yields. The amount of investment income will be impacted by the change in the yield we can earn on investments and the level of invested assets.
We expect net investment income in 2024 to increase in comparison to 2023, primarily due to higher average investment yields. The amount of investment income will be impacted by the MGIC Investment Corporation 2023 Form 10-K | 48 MGIC Investment Corporation and Subsidiaries change in the yield we can earn on investments and the level of invested assets.
Premiums we cede under our quota share transactions is also impacted by the profit commission we receive. The amount of profit commission is variable year-to-year and is dependent on the amount of losses incurred ceded. In 2022, negative losses incurred increased the profit commission we received, resulting in lower ceded premiums.
Premiums we cede under our quota share transactions are also impacted by the profit commission we receive. The amount of profit commission is variable year-to-year and is dependent on the amount of losses incurred ceded. In 2023, compared to 2022, the increase in ceded losses incurred decreased the profit commission we received, resulting in higher ceded premiums.
PMIERs credit is generally not given for the reinsured risk above the PMIERs requirement. Our existing reinsurance transactions are subject to periodic review by the GSEs and there is a risk we will not receive our current level of credit in future periods for the risk ceded under them.
Our existing reinsurance transactions are subject to periodic review by the GSEs and there is a risk we will not receive our current level of credit in future periods for the risk ceded under them. In addition, we may not receive the same level of credit under future transactions that we receive under existing transactions.
Generally speaking, in a rising rate environment, total mortgage originations may decline; however, absent material accumulated home price appreciation since the issuance of a policy, we would also expect policy cancellation rates to decline, and in turn increase persistency, although the impact generally lags the change in interest rates.
Generally speaking, in a rising rate environment, total mortgage originations may decline; however, we would also expect policy cancellation rates to decline, and in turn increase annual persistency, although the impact generally lags the change in interest rates.
Government programs. PMI also competes against government mortgage insurance programs such as the FHA, VA, and USDA, primarily for lower FICO score business. The combined market share of primary mortgage insurance written by government programs continues to exceed that written by PMI in 2022 and 2021.
MGIC Investment Corporation 2023 Form 10-K | 47 MGIC Investment Corporation and Subsidiaries Government programs PMI also competes against government mortgage insurance programs such as the FHA, VA, and USDA, primarily for lower FICO score business. The combined market share of primary mortgage insurance written by government programs continues to exceed that written by PMI in both 2023 and 2022.
Such attacks may also increase as a result of retaliation by Russia in response to actions taken by the U.S. and other countries in connection with Russia's military invasion of Ukraine. The Company operates under a hybrid workforce model and such model may be more vulnerable to security breaches.
Such attacks may also increase as a result of retaliation by threat actors against actions taken by the U.S. and other countries in connection with wars and other global events. The Company operates under a hybrid workforce model and such model may be more vulnerable to security breaches.
As of January 2023, the total average mortgage origination forecasts from the Fannie Mae and MBA indicate mortgage originations of $1.8 trillion in 2023, compared to an estimated $2.3 trillion in 2022. Both purchase originations and refinance transactions are forecasted to decline in 2023 when compared to 2022.
As of January 2024, the total average mortgage origination forecasts from Fannie Mae and the MBA indicate mortgage originations of $2.0 trillion in 2024, compared to an estimated $1.6 trillion in 2023. Both purchase originations and refinance transactions are forecasted to increase in 2024 when compared to 2023. We are expecting NIW to increase slightly in 2024 compared to 2023.
As of December 31, 2022, 80% of our primary RIF was written subsequent to December 31, 2019, 85% of our primary RIF was written subsequent to December 31, 2018, and 88% of our primary RIF was written subsequent to December 31, 2017. The pattern of claim frequency can be affected by many factors, including persistency and deteriorating economic conditions.
As of December 31, 2023, 67% of our primary RIF was written subsequent to December 31, 2020, 84% of our primary RIF was written subsequent to December 31, 2019, and 89% of our primary RIF was written subsequent to December 31, 2018. The pattern of claim frequency can be affected by many factors, including annual persistency and deteriorating economic conditions.
Investment income Our investment portfolio is composed principally of investment grade fixed income securities. The principal factors that influence investment income are the size of the portfolio and its yield.
MGIC Investment Corporation 2023 Form 10-K | 51 MGIC Investment Corporation and Subsidiaries Investment income Our investment portfolio is composed principally of investment grade fixed income securities. The principal factors that influence investment income are the size of the portfolio and its yield.
Our reinsurance transactions enable us to earn higher returns on our business than we would without them because they reduce the Minimum Required Assets we must hold under PMIERs. However, reinsurance may not always be available to us, or available on similar terms and our reinsurance subjects us to counterparty credit risk.
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.
IIF Our IIF increased 7.6% in 2022 and is expected to be relatively flat in 2023. Our book of IIF is an important driver of our future revenues, and its growth is driven by our ability to generate NIW and the retention of our IIF , as measured by our persistency. Interest rates influence both our NIW and persistency.
Our book of IIF is an important driver of our future revenues, and its growth is driven by our ability to generate NIW and the retention of our IIF , as measured by our annual persistency. Interest rates influence both our NIW and persistency.
Refer to "Mortgage Insurance Portfolio" for additional discussion on market share, the 2022 business environment and the impact it had on operating measures including NIW, IIF and RIF. PMIERs We operate under the requirements of the PMIERs of the GSEs in order to insure loans delivered to or purchased by them.
Refer to "Mortgage Insurance Portfolio" for additional discussion on market share and our operating measures including NIW, IIF and RIF. PMIERs We operate under the requirements of the PMIERs of the GSEs in order to insure loans delivered to or purchased by them. The PMIERs include financial requirements as well as business, quality control and certain transactional approval requirements.
In 2023, we expect interest rates to remain elevated compared to recent years and home prices to decline. Results of operations Premiums. Our direct premiums written and earned are impacted by our IIF during the period and our in force premium yield, both of which are expected to be relatively flat in 2023 when compared to 2022.
Results of operations Premiums Our direct premiums written and earned are impacted by our IIF during the period and our in force premium yield, both of which are expected to be relatively flat in 2024 when compared to 2023.
For additional information on how on 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. ” As noted above, the COVID-19 pandemic may adversely affect our future business, results of operations, and financial condition.
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. ” The future effects of climate change on our business are uncertain.
GSE Risk Share Transactions In 2018, the GSEs initiated secondary mortgage market programs with loan level mortgage default coverage provided by various (re)insurers that are not mortgage insurers governed by PMIERs, and that are not selected by the lenders. Due to differences in policy terms, these programs may offer premium rates that are below prevalent single premium LPMI rates.
GSE Risk Share Transactions In 2018, the GSEs initiated secondary mortgage market programs with loan level mortgage default coverage provided by various (re)insurers that are not mortgage insurers governed by PMIERs, and that are not selected by the lenders.
In addition, we may not receive the same level of credit under future transactions that we receive under existing transactions. If MGIC is not allowed certain levels of credit under the PMIERs, under certain circumstances, MGIC may terminate the reinsurance transactions without penalties.
If MGIC is not allowed certain levels of credit under the PMIERs, under certain circumstances, MGIC may terminate the reinsurance transactions without penalties.
The increased role that the federal government has assumed in the residential housing finance system through the GSE conservatorship may increase the likelihood that the business practices of the GSEs change, including through administrative action, in ways that have a material adverse effect on us and that the charters of the GSEs are changed by new federal legislation.
The increased role that the federal government has assumed in the residential housing finance system through the GSE conservatorships may increase the likelihood that the business practices of the GSEs change, including through administration changes and actions. Such changes could have a material adverse effect on us.
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.
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.
Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that will hinder the Company’s ability to identify, investigate and recover from incidents.
We could be similarly affected by threats against our vendors and/or third-parties with whom we share information. Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that may hinder the Company’s ability to identify, investigate and recover from incidents.
While new delinquency notices added approximately $149.6 million to losses incurred in 2022, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of approximately $404.1 million, primarily related to a decrease in the estimated claim rate on delinquencies.
While new delinquency notices added $187.7 million to losses incurred in 2023, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of $208.5 million. In 2022, new delinquency notices added approximately $149.6 million to losses incurred, offset by re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of $404.1 million.
For additional information about how the COVID-19 pandemic may impact our future financial results, business, liquidity, and/or financial condition, see our Risk Factor titled “ The COVID-19 pandemic may materially impact our business and future financial condition. ” FACTORS AFFECTING OUR RESULTS 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, restrictions and costs on mortgage credit, and other factors.
FACTORS AFFECTING OUR RESULTS 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.
On January 24, 2023, the Board of Directors declared a quarterly cash dividend to holders of the company's common stock of $0.10 per share payable on March 2, 2023, to shareholders of record at the close of business on February 17, 2023.
On January 23, 2024, the Board of Directors declared a quarterly cash dividend to holders of the company's common stock of $0.115 per share payable on March 5, 2024, to shareholders of record at the close of business on February 15, 2024. We expect to continue to make dividend payments to shareholders in 2024.
At December 31, 2022, MGIC’s risk-to-capital ratio was 10.2 to 1, below the maximum allowed by the jurisdictions with State Capital Requirements, and its policyholder position was $3.5 billion above the required MPP of $2.1 billion. Our risk-to-capital ratio and MPP reflect full credit for the risk ceded under our reinsurance transactions.
MGIC's "policyholder position" includes its net worth or surplus and its contingency reserve. At December 31, 2023, MGIC’s risk-to-capital ratio was 10.2 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.
Repurchase Program Expiration Date Repurchased (in millions) Authorization Remaining (in millions) 2020 Authorization December 31, 2021 $ 300 $ — 2021 Authorization December 31, 2023 $ 386 $ 114 As of December 31, 2022, we had approximately 293 million shares of common stock outstanding which was a decrease of 8.4% from December 31, 2021.
Repurchase Program Repurchased during 2023 (in millions) Authorization Remaining (in millions) at 12/31/23 Expiration Date 2021 Authorization $ 114 $ — N/A 2023 Authorization $ 226 $ 274 July 1, 2025 As of December 31, 2023, we had approximately 272.5 million shares of common stock outstanding which was a decrease of 7.2% from December 31, 2022.
All information technology systems are potentially vulnerable to damage or interruption from a variety of sources, including by cyber attacks, such as those involving ransomware. The Company discovers vulnerabilities and regularly blocks a high volume of attempts to gain unauthorized access to its systems.
All information technology systems are potentially vulnerable to damage or interruption from a variety of sources, including by cyber attacks, such as those involving ransomware. We regularly defend against threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions.
We may not be aware of industry rate changes until we observe that our volume of NIW has changed. In addition, business under customized rate plans is awarded by certain customers for only limited periods of time. As a result, our NIW may fluctuate more than it had in the past.
In addition, business under customized rate plans is awarded by certain customers for only limited periods of time. As a result, our NIW may fluctuate more than it had in the past. IIF Our IIF decreased 0.6% in 2023 and is expected to remain relatively flat in 2024.
Dividends to shareholders In the first and second quarters of 2022, we paid quarterly cash dividends of $0.08 per share to shareholders which totaled $51.0 million. In the third and fourth quarters of 2022, we paid quarterly cash dividends of $0.10 per share which totaled $60.7 million.
In the third and fourth quarters of 2023, we paid quarterly cash dividends of $0.115 per share which totaled $65.3 million.
Based on our application of PMIERs, MGIC's Available Assets under PMIERs totaled $5.7 billion, an excess of $2.3 billion over its Minimum Required Assets at December 31, 2022.
Based on our application of PMIERs, MGIC's Available Assets under PMIERs totaled $5.8 billion, an excess of $2.4 billion over its Minimum Required Assets at December 31, 2023. BUSINESS OUTLOOK FOR 2024 Our outlook for 2024 should be viewed against the backdrop of the business environment discussed above.
The state of the economy, local housing markets and various other factors, may result in delinquencies not following the typical pattern.
The level of new delinquencies has historically followed a seasonal pattern, with new delinquencies in the first part of the year lower than new delinquencies in the latter part of the year. The state of the economy, local housing markets, and various other factors, including pandemics, may result in delinquencies not following the typical pattern.
The increase in net income primarily reflects a decrease in losses incurred, partially offset by a higher provision for income taxes and other underwriting and operating expenses, net. Diluted income per share increased due to an increase in net income and a decrease in the number of diluted weighted average shares outstanding.
The decrease in adjusted net operating income in 2023 compared to 2022 is primarily due to a decrease in net income. The decrease in 2023 adjusted net operating income per diluted share compared to 2022 is primarily due to a decrease in adjusted net operating income, partially offset by a decrease in the number of diluted weighted average shares outstanding.
In 2023, we expect to incur settlement accounting charges as a result of lump sum settlements for employees who retired in the fourth quarter of 2022. Income taxes. We expect our 2023 effective tax rate to be approximately 21%. CAPITAL MGIC dividend payments to our holding company The ability of MGIC to pay dividends is restricted by insurance regulation.
Underwriting and operating expenses, net We expect underwriting and operating expenses, net to be modestly lower in 2024 compared to 2023. Income taxes We expect our 2024 effective tax rate to be approximately 21%. CAPITAL MGIC dividend payments to our holding company The ability of MGIC to pay dividends is restricted by insurance regulation.
Higher interest rates also decreased refinance activity during 2022, after a robust 2021. This resulted in a decrease in our NIW, to $76.4 billion in 2022 when compared to $120.2 billion in 2021. The level of interest rates, and home prices may change in the future.
BUSINESS ENVIRONMENT Economic conditions Home purchases decreased in 2023, compared to 2022, due to higher interest rates and higher home prices. Higher interest rates also resulted in decreased refinance activity during 2023. This led to a decrease in our NIW, to $46.1 billion in 2023 compared to $76.4 billion in 2022.
In 2022, execution of transactions for XOL reinsurance through the ILN market was more challenging primarily due to increased pricing. 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.
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 generally not given for the reinsured risk above the PMIERs requirement.
CYBERSECURITY As part of our business, we maintain large amounts of confidential and proprietary information, including personal information of consumers and employees, on our servers and those of cloud computing services.
CYBERSECURITY As part of our business, we maintain large amounts of confidential and proprietary information both on our own servers and those of cloud computing services. This includes personal information of consumers and our employees. Personal information is subject to an increasing number of federal and state laws and regulations regarding privacy and data security, as well as contractual commitments.
As a result of the decrease in forecasted mortgage originations, we are expecting NIW to be lower in 2023 compared to 2022. The widespread use of risk based pricing systems by the PMI industry makes it more difficult to compare our rates to those offered by our competitors.
The widespread use of risk based pricing systems by the PMI industry makes it more difficult to compare our rates to those offered by our competitors. We may not be aware of industry rate changes until we observe that our volume of NIW has changed.
The favorable development primarily resulted from greater than expected cure rates, as borrower reinstatements and servicer mitigation efforts resulted in more cures than originally estimated. Additionally, home price appreciation experienced in recent years has allowed borrowers to cure their delinquencies through the sale of their property.
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.
A risk-to-capital ratio will increase if (i) the percentage decrease in capital exceeds the percentage MGIC Investment Corporation 2022 Form 10-K | 46 MGIC Investment Corporation and Subsidiaries decrease in insured risk, or (ii) the percentage increase in capital is less than the percentage increase in insured risk.
A risk-to-capital ratio will increase if (i) the percentage decrease in capital exceeds the percentage decrease in insured risk, or (ii) the percentage increase in capital is less than the percentage increase in insured risk. Wisconsin does not regulate capital by using a risk-to-capital measure but instead requires a MPP.
Net cash provided by operating activities in 2022 decreased compared to 2021 primarily due to an increase in income taxes paid, increase in underwriting and operating expenses paid, a decrease in investment income collected, and a decrease in premiums received. This was partially offset by a decrease in losses paid, net of reinsurance settlements and a decrease in interest payments.
The decrease in net income is primarily due to an increase in losses incurred and a decrease in net premiums earned. This was partially offset by an increase in investment income, net of expenses, a decrease in loss on debt extinguishment, and a decrease in our provision for income taxes.
We expect net losses and LAE paid to increase, however, the magnitude and timing of the increases are uncertain. The losses and LAE paid on reinsurance terminations decreased in 2022 when compared to 2021.
In addition, an increase in third party property sales prior to claim settlement, has resulted in a decrease in the average claim paid on the claims we do receive. We expect net losses and LAE paid to increase; however, the magnitude and timing of the increases are uncertain.
The repurchase programs may be suspended for periods or discontinued at any time. We repurchased approximately 27.8 million shares in 2022 using approximately $386 million of holding company resources. In 2021, we repurchased approximately 19.0 million shares of our common stock using approximately $291 million of holding company resources.
Share repurchase programs Repurchases may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. The repurchase programs may be suspended for periods or discontinued at any time. We repurchased approximately 21.7 million shares in 2023 using approximately $340.6 million of holding company resources.
As of December 31, 2022, MGIC’s Available Assets under PMIERs totaled approximately $5.7 billion, an excess of approximately $2.3 billion over its Minimum Required Assets; and MGIC is in compliance with the requirements of the PMIERs and eligible to insure loans delivered to or purchased by the GSEs.
Based on our interpretation of the PMIERs as of December 31, 2023, MGIC’s Available Assets totaled $5.8 billion, or $2.4 billion in excess of its Minimum Required Assets.
Our claims paid activity slowed at the start of the COVID-19 pandemic primarily due to forbearance and foreclosure moratoriums put in place. Claim activity has not yet returned to pre-COVID-19 levels. We expect net losses and LAE paid to increase, however, the magnitude and timing of the increases are uncertain. Underwriting and operating expenses, net.
Our claims paid activity slowed at the start of the COVID-19 pandemic primarily due to forbearance and foreclosure moratoriums put in place, and it has not yet appreciably increased from those suppressed levels. Home price appreciation experienced in recent years has allowed some borrowers to cure their delinquencies through the sale of their property.
For information about how the payment of dividends by our holding company will result in an adjustment to the conversion rate and price of our convertible securities, see our risk factor titled “ Your ownership in our company may be diluted by additional capital that we raise ” in Item 1A .
For additional information about our reinsurance transactions, see 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 .
Our effective tax rate for 2022 and 2021 approximated the federal statutory income tax rate of 21%. See Note 12 – “Income Taxes” to our consolidated financial statements for a discussion of our tax position.
See Note 7 - “Debt” to our consolidated financial statements for a discussion of the 9% Debenture conversion in 2023. Our provision for income taxes decreased to $189.3 million in 2023 compared to $224.7 million in 2022 primarily due to a decrease in income before tax. Our effective tax rate for 2023 was 21.0% compared to 20.6% for 2022.
Losses incurred, net were $(254.6) million, a decrease of $319.1 million compared with losses incurred of $64.6 million for the prior year.
Net investment income in 2023 was $214.7 million, compared with $167.5 million in the prior year. The increase in net investment income was due to an increase of 80 basis points in the average investment yield. Losses incurred, net were $(20.9) million, compared with $(254.6) million for the prior year.
The increase was primarily driven by higher home prices and interest rates, and a higher percentage of NIW from purchase transactions. Refer to "Mortgage Insurance Portfolio" for additional discussion of changes in our NIW mix during 2022. Competition PMI. The private mortgage insurance industry is highly competitive and is expected to remain so.
The percentage of our NIW with DTI ratios over 45% and LTVs over 95% will fluctuate based on the mortgage conditions that could include the percentage of NIW from purchase transactions, changes in home prices, changes in mortgage rates, and GSE activities. Refer to "Mortgage Insurance Portfolio" for information on our NIW mix during 2023.
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Adjusted net operating income for 2022 was $904.8 million (2021: $658.6 million) and adjusted net operating income per diluted share was $2.91 (2021: $1.91). Adjusted net operating income for 2022 and 2021 included adjustments for a loss on debt extinguishment and net realized investment gains (losses).
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Diluted income per share decreased primarily due to a decrease in net income, partially offset by a decrease in the number of diluted weighted average shares outstanding. Adjusted net operating income for 2023 was $724.4 million (2022: $904.8 million) and adjusted net operating income per diluted share was $2.53 (2022: $2.91).
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In 2021, new delinquency notices added approximately $124.6 million to losses incurred, while our re-estimation of loss reserves on previously received delinquency notices resulted in $60 million of favorable loss development primarily due to the decrease in the claim rate on delinquencies received prior to the COVID-19 pandemic.
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Premiums earned for 2023 were $952.6 million, compared with $1,007.1 million for the same period last year. The decrease in premiums earned compared with the prior year is primarily due to an increase in ceded premiums that was the result of a decrease in the profit commission earned on our QSR Transactions.
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This was offset by the recognition of a probable loss of $6.3 million related to litigation of our claims paying practices and adverse development on LAE reserves and reinsurance. The increase in our provision for income taxes to $224.7 million in 2022 compared to $166.8 million in 2021 was primarily due to an increase in income before tax.
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MGIC Investment Corporation 2023 Form 10-K | 46 MGIC Investment Corporation and Subsidiaries We did not record a loss on debt extinguishment in 2023.
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Our effective tax rate for 2022 was 20.6% compared to 20.8% for 2021. Other underwriting and operating expenses, net increased to $236.7 million in 2022 from $198.4 million in 2021 primarily due to higher expenses related to our technology investments, particularly in data and analytics, and an increase in pension expense.
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The level of interest rates and home prices may change in the future.
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Pension expenses increased in 2022 as a result of settlement accounting charges during 2022. MGIC Investment Corporation 2022 Form 10-K | 43 MGIC Investment Corporation and Subsidiaries BUSINESS ENVIRONMENT Economic conditions Due to higher interest rates and higher home prices in 2022, there was a decrease in home purchases in 2022 after a strong 2021.
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Our insurance in force was relatively flat during the year as a result of a lower NIW, offset by increased annual persistency.
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Higher interest rates and home prices, resulted in a decrease in our NIW in 2022 when compared to 2021. The percentage of our NIW with DTI ratios over 45% and LTV's over 95% increased in 2022 when compared with 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt December 31, 2022, the modified duration of our fixed income investment portfolio was 4.3 years, which means that an instantaneous parallel shift in the yield curve of 100 basis points would result in a change of 4.3% in the fair value of our fixed income portfolio.
Biggest changeAt December 31, 2023, the effective duration of our fixed income investment portfolio was 3.8 years, which means that an instantaneous parallel shift in the yield curve of 100 basis points would result in a change of 3.8% in the fair value of our fixed income portfolio.
For an upward shift in the yield curve, the fair value of our portfolio would decrease and for a downward shift in the yield curve, the fair value would increase. A discussion of portfolio strategy appears in "Management's Discussion and Analysis – Balance Sheet Review– Investment Portfolio" in Item 7 . MGIC Investment Corporation 2022 Form 10-K | 75
For an upward shift in the yield curve, the fair value of our portfolio would decrease and for a downward shift in the yield curve, the fair value would increase. A discussion of portfolio strategy appears in "Management's Discussion and Analysis – Balance Sheet Review– Investment Portfolio" in Item 7 . MGIC Investment Corporation 2023 Form 10-K | 80

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