Reinsurance

3 Months Ended

Mar. 31, 2025

Reinsurance Disclosures [Abstract]

Reinsurance

Reinsurance

We have in place reinsurance agreements executed under quota share reinsurance (“QSR”) transactions and excess-of-loss (“XOL”) transactions as discussed below. The effect of all of our reinsurance transactions on our consolidated statement of operations is shown in table 4.1 below.

Reinsurance
Table	4.1
		Three Months Ended March 31,
(In thousands)		2025		2024
Premiums earned:
Direct		$	284,821	$	284,021
Assumed		3,561		3,442
Ceded:
Ceded - quota share reinsurance (1)		(29,943)		(28,715)
Ceded - excess-of-loss reinsurance		(14,720)		(16,104)
Total ceded		(44,663)		(44,819)
Net premiums earned		$	243,719	$	242,644
Losses incurred:
Direct		$	16,017	$	10,979
Assumed		5		29
Ceded - quota share reinsurance		(6,431)		(6,453)
Losses incurred, net		$	9,591	$	4,555
Other Reinsurance Impacts:
Profit commission on quota share reinsurance (1)		$	28,695	$	24,584
Ceding commission on quota share reinsurance		11,727		10,660

(1)Ceded premiums earned are shown net of profit commission.

Quota share reinsurance

We have entered into QSR Transactions with panels of third-party reinsurers to cede a fixed percentage of premiums earned and received and losses incurred on insurance covered by the transactions. We receive the benefit of a ceding commission equal to 20% of premiums ceded before profit commission. We also receive the benefit of a profit commission through a reduction of premiums we cede. The profit commission varies inversely with the level of losses on a “dollar for dollar” basis and can be eliminated at certain annual loss ratios as defined below. Ceded losses incurred are impacted by the delinquencies covered by our QSR Transactions, our estimates of payments that will be ultimately made on those delinquencies, and claim payments covered by our QSR Transactions.

Each of our QSR Transactions typically have annual loss ratio caps of 300% and lifetime loss ratio caps of 200%.

Table 4.2 below provides additional detail regarding our QSR Transactions.

Quota Share Reinsurance
Table	4.2
Quota Share Contract		Covered Policy Years	Quota Share %		Annual Loss Ratio to Exhaust Profit Commission (1)		Contractual Termination Date
2020 QSR and 2021 QSR		2021	14.8	%	69.0	%	December 31, 2036
2021 QSR and 2022 QSR		2021	11.1	%	69.0	%	December 31, 2036
2021 QSR and 2022 QSR		2022	15.0	%	57.5	%	December 31, 2033
2022 QSR and 2023 QSR		2022	15.0	%	62.0	%	December 31, 2033
2022 QSR and 2023 QSR		2023	15.0	%	62.0	%	December 31, 2034
2023 QSR		2023	10.0	%	58.5	%	December 31, 2034
2024 QSR		2024	30.0	%	56.0	%	'December 31, 2035
2025 QSR		2025	40.0	%	63.0	%	'December 31, 2036
Credit Union QSR		2020-2025	65.0	%	50.0	%	December 31, 2039

(1) We will receive a profit commission provided the annual loss ratio on policies covered under the transaction remains below this ratio.

We can elect to terminate the QSR Transactions under specified scenarios without penalty upon prior written notice, including if we will receive less than 90% (80% for the Credit Union QSR Transaction) of the full credit amount under the PMIERs, full financial statement credit or full credit under applicable regulatory capital requirements for the risk ceded in any required calculation period.

Table 4.3 provides additional details regarding optional termination dates and optional reductions to our quota share percentage which can, in each case, be elected by us for a fee. Under the optional reduction to the quota share percentage, we may reduce our quota share percentage from the original percentage shown in table 4.2 to the percentage shown in table 4.3.

Quota Share Reinsurance
Table	4.3
Quota Share Contract	Covered Policy Years	Optional Termination Date (1)	Optional Quota Share % Reduction Date (2)	Optional Reduced Quota Share %
2020 QSR and 2021 QSR	2021	December 31, 2027	January 1, 2028	12.3% or 10%
2021 QSR and 2022 QSR	2021	December 31, 2027	January 1, 2028	9.4% or 7%
2021 QSR and 2022 QSR	2022	July 1, 2025	January 1, 2025	12.5% or 10%
2022 QSR and 2023 QSR	2022	July 1, 2025	January 1, 2025	12.5% or 10%
2022 QSR and 2023 QSR	2023	December 31, 2025	January 1, 2025	12.5% or 10%
2023 QSR	2023	December 31, 2025	January 1, 2025	8% or 7%
2024 QSR	2024	December 31, 2027	December 31, 2027	23% or 15%
2025 QSR	2025	December 31, 2027	December 31, 2027	30% or 20%

(1) We can elect early termination of the QSR Transaction beginning on this date, and semi-annually thereafter.

(2) We can elect to reduce the quota share percentage beginning on this date, and semi-annually thereafter.

We have executed a 40% QSR transaction with a group of unaffiliated reinsurers covering most of our new insurance written in 2026.

Under the terms of our QSR Transactions, ceded premiums earned, ceding commissions, profit commission, and ceded paid loss and LAE are settled net on a quarterly basis. The ceded premiums earned due, after deducting the related ceding commission and profit commission, is reported within Other liabilities on the consolidated balance sheets.

The reinsurance recoverable on loss reserves related to our QSR Transactions was $51.9 million as of March 31, 2025 and $47.3 million as of December 31, 2024. The reinsurance recoverable balance is secured by funds on deposit from reinsurers (which does not include letters of credit), the minimum amount of which is based on the greater of 1) a reinsurer's funding requirements under PMIERs or 2) ceded reserves and unpaid losses. Each of the reinsurers under our QSR Transactions described above has an insurer financial strength rating of A- or better (or a comparable rating) by Standard and Poor's Rating Services, A.M. Best, Moody's, or a combination of the three.

Excess of loss reinsurance

We have XOL Transactions with a panel of unaffiliated reinsurers executed through the traditional reinsurance market (“Traditional XOL Transactions”) and with unaffiliated special purpose insurers (“Home Re Transactions”).

For policies covered under our Traditional XOL Transactions, we retain the first layer of the aggregate losses paid, and the reinsurers will then provide second layer coverage up to the outstanding reinsurance coverage amount. We retain losses paid in excess of the outstanding reinsurance coverage amount. The reinsurance coverage is subject to adjustment based on the risk characteristics of the covered loans until the initial excess of loss reinsurance coverage layer has been finalized.

We can elect to terminate our Traditional XOL Transactions under specified scenarios without penalty upon prior written notice, including if we will receive less than the full credit amount under the PMIERs, full financial statement credit or full credit under applicable regulatory capital requirements for the risk ceded in any required calculation period. The reinsurance premiums ceded under the Traditional XOL Transactions are based off the remaining reinsurance coverage levels. The reinsured coverage levels are secured by funds on deposit from reinsurers (which does not include letters of credit), the minimum amount of which is based on the greater of 1) a reinsurer's funding requirements under PMIERs or 2) ceded reserves and unpaid losses. Each of the reinsurers under our Traditional XOL Transactions has an insurer financial strength rating of A- or better (or a comparable rating) by Standard and Poor’s Rating Services, A.M. Best, Moody’s, or a combination of the three.

The Home Re Transactions are executed with unaffiliated special purpose insurers (“Home Re Entities”). For the reinsurance coverage periods, we retain the first layer of the respective aggregate losses paid, and a Home Re Entity will then provide second layer coverage up to the outstanding reinsurance coverage amount. We retain losses paid in excess of the outstanding reinsurance coverage amount. Subject to certain conditions, the reinsurance coverage decreases as the underlying covered mortgages amortize or are repaid, or mortgage insurance losses are paid.

The Home Re Entities financed the coverages by issuing mortgage insurance-linked notes (“ILNs”) to unaffiliated investors in an aggregate amount equal to the initial reinsurance coverage amounts. Each ILN is non-recourse to any assets of MGIC or affiliates. The proceeds of the ILNs, which were deposited into reinsurance trusts for the benefit of MGIC, will be the source of reinsurance claim payments to MGIC and principal repayments on the ILNs.

Payment of principal on the related insurance-linked notes will be suspended and the reinsurance coverage available to MGIC under the transactions will not be reduced by such principal payments until a target level of credit enhancement is obtained or if certain thresholds or “Trigger Events” are reached, as defined in the related insurance-linked notes transaction agreement. As of March 31, 2025, there were no "Trigger Events".

Table 4.4a, 4.4b, and 4.4c provide a summary of our XOL Transactions as of March 31, 2025 and December 31, 2024.

Excess of Loss Reinsurance
Table 4.4a
	Issue Date	Policy In force Dates	Optional Call Date (1)	Legal Maturity
2024 Traditional XOL	April 1, 2024	January 1, 2024 - December 31, 2024	January 1, 2030	10 years
2023 Traditional XOL	April 1, 2023	January 1, 2023 - December 29, 2023	January 1, 2031	10 years
2022 Traditional XOL	April 1, 2022	January 1, 2022 - December 30, 2022	January 1, 2030	10 years
2020 Traditional XOL	March 1, 2025	January 1, 2020 - December 31, 2020	April 1, 2030	10 years
Home Re 2023-1, Ltd.	October 23, 2023	June 1, 2022 - August 31, 2023	October 25, 2028	10 years
Home Re 2022-1, Ltd.	April 26, 2022	May 29, 2021 - December 31, 2021	April 25, 2028	12.5 years
Home Re 2021-2, Ltd.	August 3, 2021	January 1, 2021 - May 28, 2021	July 25, 2028	12.5 years
Home Re 2021-1, Ltd.	February 2, 2021	August 1, 2020 - December 31, 2020	January 25, 2028	12.5 years

(1) We have the right to terminate the Home Re Transactions under certain circumstances, including an optional call feature that provides us the right to terminate if the outstanding principal balance of the related insurance-linked notes falls below 10% of the initial principal balance of the related insurance-linked notes, and on any payment date on or after the respective Optional Call Date. We can elect early termination of the Traditional XOL Transactions beginning on this date, and quarterly thereafter.

Excess of Loss Reinsurance
Table 4.4b			Remaining First Layer Retention
($ in thousands)	Initial First Layer Retention		March 31, 2025		December 31, 2024
2024 Traditional XOL	$	125,016	$	124,985	$	125,016
2023 Traditional XOL	70,578		70,218		70,401
2022 Traditional XOL	82,523		80,346		81,112
2020 Traditional XOL	68,343		68,343		—
Home Re 2023-1, Ltd.	272,961		271,268		272,269
Home Re 2022-1, Ltd.	325,589		321,918		322,566
Home Re 2021-2, Ltd.	190,159		187,889		188,211
Home Re 2021-1, Ltd.	211,159		209,913		210,027

Table 4.4c							Remaining Excess of Loss Reinsurance Coverage (1)
($ in thousands)	Initial Excess of Loss Reinsurance Coverage (1)		Initial Funding Percentage (2)		Funding Percentage at 3/31/2025 (2)		March 31, 2025		December 31, 2024
2024 Traditional XOL	$	187,220	N/A		N/A		$	187,220	$	187,220
2023 Traditional XOL	96,942		N/A		N/A		87,542		91,404
2022 Traditional XOL	142,642		N/A		N/A		118,729		124,344
2020 Traditional XOL	250,592		N/A		N/A		250,592		—
Home Re 2023-1, Ltd.	330,277		97	%	96	%	285,333		299,325
Home Re 2022-1, Ltd.	473,575		100	%	100	%	282,008		305,639
Home Re 2021-2, Ltd. (3)	398,429		100	%	88	%	120,163		132,424
Home Re 2021-1, Ltd.	398,848		100	%	100	%	75,906		92,019

(1)The initial and remaining excess of loss reinsurance coverage is reduced by the applicable funding percentage.

(2)The funding percentage represents the aggregate outstanding note balances divided by the aggregate ending coverage amounts.

(3)The funding percentage on the 2021-2 was reduced from 100% after the tender offers were conducted in the fourth quarter of 2023.

The reinsurance premiums ceded to each Home Re Entity are composed of coverage, initial expense and supplemental premiums. The coverage premiums are generally calculated as the difference between the amount of interest payable by the Home Re Entity on the remaining reinsurance coverage levels, and the investment income collected on the collateral assets held in a reinsurance trust account and used to collateralize the Home Re Entity’s reinsurance obligation to MGIC. The amount of monthly reinsurance coverage premium ceded will fluctuate due to changes in the reference rate and changes in money market rates that affect investment income collected on the assets in the reinsurance trust. As a result, we concluded that each Home Re Transaction contains an embedded derivative that is accounted for separately as a freestanding derivative. The fair values of the derivatives at March 31, 2025 and December 31, 2024, were not material to our consolidated balance sheet and the change in fair value during the three months ended March 31, 2025 and March 31, 2024 were not material to our consolidated statements of operations. (See Note 7 - “Investments” and Note 8 - “Fair Value Measurements”.)

At the time the Home Re Transactions were entered into, we concluded that each Home Re Entity is a variable interest entity (“VIE”). A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make sufficient decisions relating to the entity’s operations through voting rights or do not substantively participate in gains and losses of the entity. Given that MGIC (1) does not have the unilateral power to direct the activities that most significantly affect each Home Re Entity’s economic performance and (2) does not have the obligation, outside the terms of the reinsurance agreement, to absorb losses or the right to receive benefits of each Home Re Entity that could be significant to the Home Re Entity, consolidation of the Home Re Entities is not required.

We are required to disclose our maximum exposure to loss, which we consider to be an amount that we could be required to record in our statements of operations, as a result of our involvement with the VIEs under our Home Re Transactions. As of March 31, 2025, and December 31, 2024, we did not have material exposure to the VIEs as we have no investment in the VIEs and had no reinsurance claim payments due from the VIEs under our reinsurance transactions. We are unable to determine the timing or extent of claims from losses that are ceded under the reinsurance transactions. The VIE assets are deposited in reinsurance trusts for the benefit of MGIC that will be the source of reinsurance claim payments to MGIC. The purpose of the reinsurance trusts is to provide security to MGIC for the obligations of the VIEs under the reinsurance transactions. The trustee of the reinsurance trusts, a recognized provider of corporate trust services, has established segregated accounts within the reinsurance trusts for the benefit of MGIC, pursuant to the trust agreements. The trust agreements are governed by, and construed in accordance with, the laws of the State of New York. If the trustee of the reinsurance trusts failed to distribute claim payments to us as provided in the reinsurance trusts, we would incur a loss related to our losses ceded under the reinsurance transactions and deemed unrecoverable. We are also unable to determine the impact such possible failure by the trustee to perform pursuant to the reinsurance trust agreements may have on our consolidated financial statements. As a result, we are unable to quantify our maximum exposure to loss related to our involvement with the VIEs. MGIC has certain termination rights under the reinsurance transactions should its claims not be paid. We consider our exposure to loss from our reinsurance transactions with the VIEs to be remote.

Table 4.5 presents the total assets of the Home Re Entities as of March 31, 2025 and December 31, 2024.

Home Re total assets
Table	4.5
(In thousands)		Total VIE Assets
Home Re Entity		March 31, 2025		December 31, 2024
Home Re 2023-1 Ltd.		$	290,619	$	303,733
Home Re 2022-1 Ltd.		290,274		313,229
Home Re 2021-2 Ltd.		124,487		136,486
Home Re 2021-1 Ltd.		81,406		97,373

The reinsurance trust agreements provide that the trust assets may generally only be invested in certain money market funds that (i) invest at least 99.5% of their total assets in cash or direct U.S. federal government obligations, such as U.S. Treasury bills, as well as other short-term securities backed by the full faith and credit of the U.S. federal government or issued by an agency of the U.S. federal government, (ii) have a principal stability fund rating of “AAAm” by S&P or a money market fund rating of “Aaamf” by Moody’s as of the Closing Date and thereafter maintain any rating with either S&P or Moody’s, and (iii) are permitted investments under the applicable credit for reinsurance laws and applicable PMIERs credit for reinsurance requirements.

The total calculated PMIERs credit for risk ceded under our XOL Transactions are generally based on the PMIERs requirement of the covered policies and the attachment and detachment points of the coverage, all of which fluctuate over time. (See Note 1 - “Nature of Business and Basis of Presentation”.)