MGIC Investment Corporation - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. MGIC Investment Corporation is a holding company principally engaged in the mortgage insurance business through its subsidiary, Mortgage Guaranty Insurance Corporation (MGIC). The company provides mortgage insurance to lenders and government-sponsored entities (GSEs) to protect against losses from defaults on low down payment residential mortgage loans. As of June 30, 2026, the company reported $304.8 billion of primary insurance in force and $81.8 billion of primary risk in force.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Net Premiums Earned | $238.1 million | $473.4 million |
| Net Investment Income | $59.5 million | $121.2 million |
| Losses Incurred, Net | $11.0 million | $44.2 million |
| Net Income | $182.1 million | $347.4 million |
| Diluted EPS | $0.86 | $1.62 |
| Total Assets | $6.53 billion (as of June 30, 2026) | |
| Shareholders' Equity | $5.01 billion (as of June 30, 2026) | |
| Long-Term Debt | $646.9 million (5.25% Notes due 2028) | |
| Cash and Cash Equivalents | $207.3 million (as of June 30, 2026) |
Loss Ratio: 4.6% for the three months ended June 30, 2026; 9.3% for the six months ended June 30, 2026.
Underwriting Expense Ratio: 19.8% for the three months ended June 30, 2026; 20.2% for the six months ended June 30, 2026.
Material Changes vs. Prior Period
- Revenue Decline: Net premiums earned decreased by 3% for both the three and six-month periods compared to the prior year, primarily driven by an increase in ceded premiums written due to expanded reinsurance coverage.
- Increased Losses: Losses incurred, net, increased significantly (488% for the quarter; 555% for the six months) compared to the prior year. This was due to an increase in new delinquencies reported and higher estimated severity on current year delinquencies.
- Net Income Decrease: Net income decreased by 5% for the quarter and 8% for the six months ended June 30, 2026, compared to the same periods in 2025. This was primarily due to higher losses incurred and lower net premiums earned, partially offset by lower operating expenses and tax provisions.
- EPS Increase: Despite lower net income, diluted EPS increased (6% for the quarter; 4% for the six months) due to a significant reduction in the number of diluted weighted shares outstanding from share repurchases.
- Balance Sheet: Cash and cash equivalents decreased 44% year-over-year to $207.3 million, largely due to financing activities including share repurchases and dividend payments.
Guidance, Outlook, and Risks
Outlook: Management expects full-year 2026 New Insurance Written (NIW) to remain relatively flat compared to 2025. The company anticipates that the in-force portfolio premium yield will remain relatively flat in 2026, though net premium yield may fluctuate due to reinsurance impacts and single premium policy earnings.
Capital Adequacy: MGIC remains in compliance with GSE Private Mortgage Insurer Eligibility Requirements (PMIERs). As of June 30, 2026, Available Assets totaled $5.6 billion, exceeding Minimum Required Assets by approximately $2.7 billion. The risk-to-capital ratio was 9.9 to 1, well below the maximum allowed in most jurisdictions.
Key Risks and Contingencies:
- Loss Reserve Uncertainty: Actual losses may differ materially from estimates. A $1,000 change in average severity or a 1% change in claim rate could impact loss reserves by approximately $7 million and $19 million, respectively.
- Regulatory and GSE Dependence: The majority of business is for loans purchased by Fannie Mae and Freddie Mac. Changes to GSE business practices, PMIERs, or legislative reforms could materially affect operations.
- Reinsurance: The company relies on Quota Share (QSR) and Excess-of-Loss (XOL) transactions. Changes in reinsurance availability, cost, or credit could impact capital requirements and profitability.
- Cybersecurity: The company faces risks from cyber attacks, ransomware, and data breaches which could disrupt operations and cause financial or reputational damage.
Investor Verification Checklist
- Loss Development: Verify the sustainability of favorable prior-year loss reserve development ($73.5 million redundancy in the first six months of 2026) and monitor trends in new delinquency severity.
- Reinsurance Impact: Assess the long-term impact of increased ceded premiums on net premium yield and profitability, given the 13% ceded premium ratio in Q2 2026.
- Share Repurchases: Confirm the remaining authorization for share repurchases ($806 million as of June 30, 2026) and the company's capital allocation strategy between buybacks and dividends.
- PMIERs Compliance: Monitor the $2.7 billion excess of Available Assets over Minimum Required Assets to ensure continued eligibility to write business with GSEs.
- Delinquency Inventory: Review the aging of the delinquency inventory (26,152 loans as of June 30, 2026) and the percentage of loans delinquent for 12+ months (28%) to gauge future claim severity risks.