MGIC INVESTMENT CORP (MTG) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation second quarter 26 earnings call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you will need to press 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. I will now turn the conference over to Dianna L. Higgins, Head of Investor Relations. Please go ahead.

Thank you, Ari. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the second quarter are Timothy Mattke, Chief Executive Officer, and Nathaniel Howe Colson, Chief Financial Officer. Our press release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom. It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non-GAAP financial measures to their most comparable GAAP measures. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk in force, and other information you may find valuable. As a reminder, from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before getting started today, I want to remind everyone that during the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Our 8-Ks and 10-Q filed yesterday include additional information about the factors that could cause actual results to differ materially from those discussed on the call today. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. No one should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of our 8-Ks or 10-Q. With that, I now have the pleasure to turn the call over to Timothy.

Thanks, Dianna. Good morning, everyone. Our deep industry expertise, strong balance sheet, and unwavering focus on our customers continue to drive long-term value creation. Our results reflect the strength of our business model and our disciplined execution across the business. In the second quarter, we generated net income of $182 million, delivering an annualized return on equity of 14.5%. Our consistent execution, combined with the strength of our balance sheet, drove book value per share to $24.27, an increase of 10% year-over-year. We also paid $0.60 per share in dividends in the last 12 months. We wrote $18 billion of new insurance in the second quarter, an increase of 8.5% from the second quarter of 2025 and our highest NIW since the third quarter of 2022. We expect the increase was due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market. Insurance in force ended the quarter at $305 billion, up slightly in the quarter and up 2.6% from a year ago. At the end of the second quarter, annual persistency was 83%, down slightly from 84% last quarter. Both insurance in force and annual persistency were in line with the expectations we previously shared. We continue to see solid performance across our well-balanced portfolio, supported by strong credit quality and disciplined underwriting practices. Early payment defaults continue to track at low levels, reinforcing our confidence in near-term credit expectations. Our capital structure remains robust, with $6 billion of balance sheet capital and a well-established reinsurance program that continues to be a core component of our risk and capital management strategy. Reinsurance agreements with a panel of highly rated reinsurers reduce loss volatility in stress scenarios while providing capital diversification and flexibility at attractive costs. During the second quarter, we further enhanced our reinsurance program by executing a traditional excess of loss reinsurance transaction that provides up to $168 million of protection on eligible NIW in 2027. At the end of the second quarter, our reinsurance program reduced our PMIERs required assets by $3.1 billion, or approximately 52%.

With that, let me turn it over to Nathaniel to provide more details on our financial results and capital management activities for the quarter. Thanks, Timothy, and good morning. As Tim discussed, we had solid financial results for the second quarter. We earned net income of $0.86 per diluted share compared to $0.81 per diluted share last year. Our re-estimation of ultimate losses on prior delinquencies resulted in $43 million of favorable loss reserve development in the quarter. This favorable development primarily reflects better-than-expected cure activity on delinquency notices received in 2025. As a reminder, delinquency notices in any quarter span multiple book year vintages. For new delinquency notices received in the second quarter, we continue to apply our initial claim rate assumption of 7.5%. In the quarter, our count-based delinquency rate decreased 7 basis points, which we expect was driven by seasonal trends. Compared to a year ago, the delinquency rate increased 16 basis points to 2.37%. We expect seasonality to lead to an increase in delinquencies in the second half of the year. The delinquency trends through the second quarter remain consistent with the credit normalization we have been experiencing for the past three years, and the delinquency rate remains 43 basis points below the second quarter of 2019. The in-force premium yield was 38 basis points in the quarter, down a little less than 1 basis point in the past three years. With high persistency expected in 2026 and MI origination trends similar to last year, we expect the in-force premium yield to continue on a similar path to the past couple of years. Investment income totaled $59 million in the second quarter. The book yield on our investment portfolio remains approximately 4%. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield, but our capital return activities have limited the growth in the investment portfolio and the resulting investment income. Underwriting and other expenses in the quarter were $46 million, down from $52 million in the second quarter of last year, as we remain focused on disciplined expense management. We now expect operating expenses for the full year to be toward the low end of the $190 million to $200 million range we previously shared. Our approach to capital management remains unchanged. We prioritize prudent insurance in force growth over capital return. Market conditions have constrained insurance in force growth in recent years, and against that backdrop, our capital return activity reflects continued strong mortgage credit performance and our robust financial position. In the second quarter, we paid a common stock dividend of $0.15 per share. We also repurchased 6.6 million shares of stock for $177 million. Over the prior four quarters, share repurchases totaled $746 million and shareholder dividends totaled $135 million. Combined, they represented a 124% payout of the net income earned over the period. The strong financial position of both the holding company and the operating company was a key factor in the board's decision last week to approve an increase to our quarterly common stock dividend to $0.17 per share. This marks six consecutive years of dividend increases, representing a compound annual growth rate of 19% over that period.

With that, let me turn it back over to you. Thanks, Nathaniel. Last month, I assumed the role of chairman of USMI, our industry's trade association. Through decades of economic cycles, mortgage insurance has consistently demonstrated its value to homeowners, lenders, and the broader housing finance system. Mortgage insurance is at the center of several important policy discussions, and we are committed to ensuring those conversations are informed by data, experience, and a proven track record. I look forward to working with our great team at USMI and being able to represent the industry in those conversations. Turning back to MGIC, our second quarter results demonstrate the benefits of disciplined execution and the strategy we have thoughtfully refined over time. This long-term approach has supported our competitive position, driven strong business performance, and generated meaningful returns for shareholders. Combined with our continued commitment to our customers, we believe we are well positioned to capitalize on opportunities, manage through evolving market conditions, and deliver long-term value. With that, Ari, let's take questions.

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone, and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Hey, thank you. Good morning. Just want to get your latest thoughts on credit.

I think Nathaniel, last quarter, you called out Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation Second Quarter 26 Earnings Call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. To ask a question during the session, you will need to press 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. I will now turn the conference over to Dianna L. Higgins, Head of Investor Relations. Please go ahead.

Thank you, Ari. Good morning, and welcome, everyone. Thank you for your interest in MGIC. Joining me on the call today to discuss our results for the second quarter are Timothy Mattke, Chief Executive Officer, and Nathaniel Howe Colson, Chief Financial Officer. Our press release, which contains MGIC's second quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom. It includes additional information about our quarterly results that we will refer to during the call today. It also includes a reconciliation of non-GAAP financial measures to their most comparable GAAP measures. In addition, we posted on our website a quarterly supplement that contains information pertaining to our primary risk in force, and other information you may find valuable. As a reminder, from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website. Before getting started today, I want to remind everyone that during the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Our 8-Ks and 10-Q filed yesterday include additional information about the factors that could cause actual results to differ materially from those discussed on the call today. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. No one should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of our 8-Ks or 10-Q. With that, I now have the pleasure to turn the call over to Timothy.

Thanks, Dianna. And good morning, everyone. Our deep industry expertise, strong balance sheet, and unwavering focus on our customers continue to drive long-term value creation. Our results reflect the strength of our business model and our disciplined execution across the business. In the second quarter, we generated net income of $182 million, delivering an annualized return on equity of 14.5%. Our consistent execution combined with the strength of our balance sheet drove book value per share to $24.27, an increase of 10% year-over-year. We also paid $0.60 per share in dividends in the last 12 months. We wrote $18 billion of new insurance in the second quarter, an increase of 8.5% from the second quarter of 2025 and our highest NIW since the third quarter of 2022. We expect the increase was due to a slightly larger mortgage origination market, driven by seasonal growth in the purchase market. Insurance in force ended the quarter at $305 billion, up slightly in the quarter and up 2.6% from a year ago. At the end of the second quarter, annual persistency was 83%, down slightly from 84% last quarter. Both insurance in force and annual persistency were in line with the expectations we previously shared. We continue to see solid performance across our well-balanced portfolio, supported by strong credit quality and disciplined underwriting practices. Early payment defaults continue to track at low levels, reinforcing our confidence in near-term credit expectations. Our capital structure remains robust, with $6 billion of balance sheet capital and a well-established reinsurance program that continues to be a core component of our risk and capital management strategy. Reinsurance agreements with a panel of highly rated reinsurers reduce loss volatility in stress scenarios while providing capital diversification and flexibility at attractive costs. During the second quarter, we further enhanced our reinsurance program by executing a traditional excess of loss reinsurance transaction that provides up to $168 million of protection on eligible NIW in 2027. At the end of the second quarter, our reinsurance program reduced our PMIERs required assets by $3.1 billion, or approximately 52%.

With that, let me turn it over to Nathaniel to provide more details on our financial results and capital management activities for the quarter. Thanks, Timothy, and good morning. As Tim discussed, we had solid financial results for the second quarter. We earned net income of $0.86 per diluted share compared to $0.81 per diluted share last year. Our re-estimation of ultimate losses on prior delinquencies resulted in $43 million of favorable loss reserve development in the quarter. This favorable development primarily reflects better-than-expected cure activity on delinquency notices received in 2025. As a reminder, delinquency notices in any quarter span multiple book year vintages. For new delinquency notices received in the second quarter, we continue to apply our initial claim rate assumption of 7.5%. In the quarter, our count-based delinquency rate decreased 7 basis points, which we expect was driven by seasonal trends. Compared to a year ago, the delinquency rate increased 16 basis points to 2.37%. While we expect seasonality to lead to an increase in delinquencies in the second half of the year, the delinquency trends through the second quarter remain consistent with the credit normalization we have been experiencing for the past three years, and the delinquency rate remains 43 basis points below the second quarter of 2019. The in-force premium yield was 38 basis points in the quarter, down a little less than 1 basis point in the past three years. With high persistency expected in 2026 and MI origination trends similar to last year, we expect the in-force premium yield to continue on a similar path to the past couple of years. Investment income totaled $59 million in the second quarter. The book yield on our investment portfolio remains approximately 4%. During the quarter, reinvestment rates on our fixed income portfolio continued to exceed our book yield but our capital return activities have limited the growth in the investment portfolio and the resulting investment income. Underwriting and other expenses in the quarter were $46 million, down from $52 million in the second quarter of last year, as we remain focused on disciplined expense management. We now expect operating expenses for the full year to be toward the low end of the $190 million to $200 million range we previously shared. Our approach to capital management remains unchanged. We prioritize prudent insurance in force growth over capital return. Market conditions have constrained insurance in force growth in recent years, and against that backdrop, our capital return activity reflects continued strong mortgage credit performance and our robust financial position. In the second quarter, we paid a common stock dividend of $0.15 per share. We also repurchased 6.6 million shares of stock for $177 million. Over the prior four quarters, share repurchases totaled $746 million and shareholder dividends totaled $135 million. Combined, they represented a 124% payout of the net income earned over the period. The strong financial position of both the holding company and the operating company was a key factor in the board's decision last week to approve an increase to our quarterly common stock dividend to $0.17 per share. This marks six consecutive years of dividend increases, representing a compound annual growth rate of 19% over that period.

With that, let me turn it back over to you. Thanks, Nathaniel. Last month, I assumed the role of chairman of USMI, our industry's trade association. Through decades of economic cycles, mortgage insurance has consistently demonstrated its value to homeowners, lenders, and the broader housing finance system. Mortgage insurance is at the center of several important policy discussions. We are committed to ensuring those conversations are informed by data, experience, and a proven track record. I look forward to working with our great team at USMI and being able to represent the industry in those conversations. Turning back to MGIC, our second quarter results demonstrate the benefits of disciplined execution and the strategy we have thoughtfully refined over time. This long-term approach has supported our competitive position, driven strong business performance, and generated meaningful returns for shareholders. Combined with our continued commitment to our customers, we believe we are well positioned to capitalize on opportunities, manage through evolving market conditions, and deliver long-term value. With that, Ari, let's take questions.

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone, and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from the line of Terry Ma of Barclays. Your line is now open.

Hey, thank you. Good morning. Just want to get your latest thoughts on credit. I think Nathaniel, last quarter, you called out a 10- to 15-basis-point year-over-year increase in the delinquency rate as consistent with credit normalization. We are certainly in that ballpark the last two quarters. So is there any color you can provide on new notices by region or vintage that can maybe just inform our view of credit going forward?

Yeah, Terry, it is Nathaniel. Thanks for the question. You know, it is something that we look at closely, not just quarterly, but really on a monthly basis. What is the mix of new delinquencies? What are we seeing in early payment default trends? What are we seeing across any of the single dimension variables or even multiple dimensions? As we look at it, other than the continuous roll forward to more recent vintages, which is what you would expect, when we look at it across other key credit variables, we really do not see a lot of difference in the mix, and we are not seeing it geographically. We are not seeing it really correlated to, say, home price changes in various states. So, again, something that makes us feel confident that we are looking at a broad-based credit normalization versus real deterioration in any segment or anything that is going to lead to changes that we feel like we need to make.

Got it. And when we think about the cure rate, all the post-COVID vintages, about 90% of new notices cure within four quarters. I think, Timothy, when I had you on stage in my conference a few years ago, you gave a number pre-pandemic that was lower than 90%. I am just wondering, as we track all the data, everything's kind of tracking toward that 90% mark. Do you expect normalization going forward lower than 90% at any given point? Just trying to think about that.

Terry, it is Nathaniel. I would maybe think about it less at a particular point in time in terms of 12 months after delinquency. What we are really focused on is what the ultimate claim rate is going to be on a group of new notices. So when we set our initial expectations at 7.5%, that is looking on a fully developed basis what percent of those new notices are ultimately going to result in a claim. The consistent favorable development that we have had is a result of actual claim rates being quite a bit lower than that 7.5% that we were putting up initially. I will say, and we have talked about this over the last couple of calls too, we are coming off the lowest point for us for the new notice claim rate which was the second quarter of 2020, the peak COVID quarter, where ultimate claim rates were less than 1% out of that group. So we are certainly not running at that level anymore. But today it looks like fully developed notice quarters maybe from say two or three years ago are more in that 2% to 3% range, and more recent ones are trending slightly higher than that. So fully developed notice quarters today, we might be thinking 3% to 4% ultimate claim rate. Still quite a bit lower than what we are expecting on new notices. I think that is because the conditions have played out quite favorably over the last two or three years, although there has been a lot of uncertainty at every point along the way. We still feel quite comfortable with our initial new notice expectations. But if credit conditions remain what they are today, we likely will have additional reserve redundancy that will be released through favorable development in the future.

Got it. Thank you.

Thank you. Our next question comes from the line of Bose George of KBW. Your line is now open.

Hey, guys. Good morning. Just first, wanted to ask about competitive trends in the market, anything to call out there?

Yeah. Bose, I mean, it is a competitive marketplace with six active participants. I would not say anything stands out this quarter. When we look at the gross premium rate, which is what we really focus on, it did grind down a little bit more this quarter, and that has been the trend over the last couple of years. So not any major changes quarter-to-quarter, but the trend has been slightly downward. Not unexpected from our standpoint. Again, nothing that has changed in the competitive marketplace that is caused that, but it has been the general direction, though not steepening.

Okay. Great. Thanks. And then an issue on reinsurance? So you guys did the transaction. Can you compare the execution in the traditional reinsurance versus the ILN market? Is the benefit here more structural, or is the pricing better here? Or just contrast the two?

Yep, Bose, it is Nathaniel. I think the biggest thing is the XOL we just did is really covering 2027 NIW, whereas the ILN market is all on a kind of warehouse, already in-force loans. We have to spend time to build a pool for ILNs. There are also fixed costs associated with doing those deals and size requirements that are expected in the market. You can do smaller reinsurance deals with traditional excess of loss. Our intention is to be programmatic in both the excess of loss and ILN markets, but the ILN deals are individually a little bit larger. Since you have to warehouse the risk, they just happen at a slightly less frequent cadence, but we have done ILN deals pretty consistently. We have had fill-up periods as short as five months and as long as maybe two years, depending on volume. So it is a market that we want to continue to operate in. I do not view the excess of loss deal that we did covering our 2027 NIW as indicative that we are not interested in the ILN market. They are just different executions in different parts of our program.

Okay. Great. Thanks.

Thank you. Our next question comes from the line of Mihir Bhatia of Bank of America. Your line is now open.

Good morning. Thank you for taking my question. I just wanted to maybe first start big picture. Tim, you talked a little bit about credit conditions. Given the move in rates and housing, your view on the housing fundamentals, maybe talk about industry NIW this year. And related to that, just wanted to understand the underwriting posture. Are you tightening or loosening anywhere on the margin? Just your thoughts around that. Thank you.

Yeah. No, Mihir, I appreciate the question. As far as the market goes, the size has been fairly consistent with what we expected coming into the year. There is modest home price appreciation in certain parts. Purchase activity was our second largest; it was our largest NIW since 2022 and up from where we were a year ago. So you continue to see positive signs in the purchase market. The refi market is stunted by where rates are right now, and I do not think we expect that to change in the near term. Refi is normally churn in the portfolio as opposed to anything that really helps us grow in force. Affordability continues to be strained with where interest rates and home prices are, which makes it difficult to see a large change in buyers entering the market. There may be some thawing due to lock-in effects, but as rates remain high, it generally makes it tougher to see significant movement. I am a believer that the market we have seen this quarter and over the last year is what we are likely to see for the foreseeable future. That does not create a lot of growth for us, but as Nathaniel said, we would love to grow the in-force portfolio. We're content to return capital to shareholders if the overall market is not expanding and redeploying that capital into the business is not prudent.

And then just from a credit perspective, is there any loosening or tightening going on at the margin? Any thoughts around the softer home price backdrop could flow through?

Yep, Mihir, it is Nathaniel. From an underwriting guideline perspective, there really have not been meaningful changes in quite some time. The mix of business has been quite consistent as well. If anything, over the last two years there has been a slight decrease in the amount of above-45 DTI business being done, but that was more a change in market activity than a guideline change by us. We are quite comfortable with the mix we are getting and the risk-adjusted returns across the spectrum. I do not feel a need to make any meaningful underwriting changes right now given expected performance or actual performance today.

Alright. And then just my last question around buyback. Obviously, you have a new authorization in play. Could we view that as a signal of an acceleration, or is it more just continuing the current steady state because you have been returning a fair amount of capital already?

I would not view it as an acceleration. I view it as a continuation. We always want to make sure we have authorized shares to continue to execute the way we have been, and those authorizations need to be sized over time. We have tried to size it appropriately based upon earnings and capital generation. When we talk with the board about the authorization, it was much more of a continuance of what we have been doing as opposed to any acceleration.

Got it. Thank you very much.

Thank you. Our next question comes from the line of Roland Meyer of RBC Capital Markets. Your line is now open.

Hi. Good morning. I guess just going quickly off Mihir's question. On the quarter-to-date disclosure on the buyback, is that just slowed down because you are in blackout and that was set prior to the stock moving higher?

Roland, it is Nathaniel. What we have been talking about for some time is trying to size the share repurchases in this market where we are not really growing the in force, credit conditions remain good, and we are generating a lot of organic capital that we do not think we can prudently redeploy into the business. We try to size the share repurchases approximately equal to net income. We are not exactly sure what net income is going to be in any period, but on a rolling 12-month basis, we have done a pretty good job of triangulating the share repurchases to be approximately equal to net income and then slowly drawing down the excess liquidity and capital at the holding company via the shareholder dividend every quarter. It is not possible to get it exactly right each quarter, but we are largely targeting share repurchases to be approximate to net income in this kind of environment.

Thank you. And then I guess a lot of your risk in force remains in the pre-22 years. As those policies age, are we approaching any sort of cliff where larger portions detach as the LTV hit 78%?

Yes, it is Nathaniel again. We have talked about this internally. If you think about a book of business for us, it's really across the LTV spectrum. A lot of 85s, 90s, 95s and a significant amount of 97 LTV business even in those years. Most of the 85 LTV loans from those book years that were borrower paid subject to the Homeowners Protection Act have already canceled their coverage. It becomes more concentrated in the higher LTVs, but there is really no cliff event because there is a distribution of interest rates within those years too. At lower rates, you get to that point faster, but for a 95 or 97, it is still several years. So the falloff happens every month. We estimate about 4 to 5 percentage points of our falloff due to the Homeowners Protection Act. With persistency at 83%, about 5 percentage points of that 17% that falls off is due to the Homeowners Protection Act. That has been fairly consistent over time, so we do not see a big cliff coming. It is just a steady process that is embedded in persistency.

And then if I could just sneak one more in, it is a soft P&C market, and I am just curious if excess capital in reinsurance markets is helping you secure better terms on your own purchases?

I think in any markets that are adjacent, reinsurers are thinking about how to deploy their capital and where returns are, and that can have an impact. Our continued activities in the market and being programmatic helps us as well. From a broader MI industry standpoint, the fact that GSEs have laid off less risk into those markets has probably helped us bring more reinsurers to the table. If they're looking for mortgage credit in the U.S., the MI industry and MGIC are one place they can get it consistently. So I think all those things have been beneficial to us as we look to place reinsurance in those markets. Thank you. Have a great rest of your summer.

Sure. You too.

Thank you. Our next question comes from the line of Geoffrey Dunn of Dowling and Partners. Your line is now open.

Thanks. Good morning. I had another question on reinsurance. Specifically, how do you go about approaching the incremental level of reinsurance you want to put on a forward book? Obviously, you do not have a crystal ball about future credit. How did you decide on the loss band that you wanted to achieve on the 2027 XOL, for example? Does capital management come into play on that excess capital? Just some color on how you think about approaching incremental reinsurance, whether it is XOL or ILN.

Yeah, Jeff, it is Nathaniel. We think about our reinsurance program across three key dimensions: quota share reinsurance, traditional XOL, and the ILN market. It is not exactly the case every book year, but we try to do about a third of the risk sharing across each of those three categories. We have done up to, say, 40% quota shares. The excess of loss deals we have done in recent years have allocated about 30% of the risk to them, and that leaves about 30% of the risk for the ILN market. That has worked quite well for us. In terms of structuring individual transactions, there is a consistent pattern that has emerged in terms of what works well with reinsurers. First-dollar loss would be less efficient from a capital standpoint and less aligned with reinsurers' interests. Retaining a meaningful amount of the initial first-loss position is helpful. Detachment points across ILN and excess of loss structures where, if the PMIERs requirement is, say, 7%, a traditional structure would have MIs retaining the first 2.5% to 3% and then seeding the next 0.5% to 4% up to the PMIERs level. That structure has emerged because it works well for reinsurers, is quite risk-remote, and the cost of capital is attractive for us. We feel we are putting a lot of protection on the recent vintages, which is our goal.

And how does the layering of XOL and ILN work? If you are attaching at 3% on an ILN, are you laying off the 2% to 3% band through the traditional XOL? How does that mechanically work?

If you think about it in quota share terms, in a 40% quota share we are ceding 40% of the premium and 40% of the losses and 40% of the associated capital requirement. Those deals have a profit commission, which makes them attractive sometimes. We are still retaining at a loan level the remaining 60% of the risk. We then have that 60% at the loan level to allocate to other deals. When I say 30%, it's not 30% of the layer or 30% of the loans; it is really 30% of our retention of our risk in force at the loan level that is going into the excess of loss deal. So the same loan on a vintage where we have quota share, excess of loss, and ILN coverage could be in all three deals: maybe 40% of the risk in one deal, 30% in another, and 30% in another. So they sit side-by-side rather than one being strictly on top of the other.

Okay. Great. Thank you.

Thank you. There are no further questions. I will now turn the call back over to management for closing remarks. Thank you, Ari.

Let me thank everyone for your interest in MGIC. Have a great rest of your week.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.