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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the quarterly period ended | June 30, 2023
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the transition period from ______ to ______
| Commission file number | 1-10816

MGIC Investment Corporation
(Exact name of registrant as specified in its charter)

Wisconsin |  | 39-1486475
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
250 E. Kilbourn Avenue |  | 53202
Milwaukee, | Wisconsin |  | (Zip Code)
(Address of principal executive offices) |  |
(414) |  | 347-6480
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol |  | Name of each exchange on which registered
Common stock |  | MTG |  | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer | ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | ☐ | (Do not check if a smaller reporting company)
Emerging growth company | ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of July 28, 2023, there were 282,320,501 shares of common stock of the registrant, par value $1.00 per share, outstanding.

Forward Looking and Other Statements
All statements in this report that address events, developments or results that we expect or anticipate may occur in the future are “forward looking statements.” Forward looking statements consist of statements that relate to matters other than historical fact. In most cases, forward looking statements may be identified by words such as “believe,” “anticipate” or “expect,” or words of similar import. The Risk Factors referred to in “Forward Looking Statements and Risk Factors – Location of Risk Factors” in Management’s Discussion and Analysis of Financial Condition and Results of Operations below, may cause our actual results to differ materially from the results contemplated by forward looking statements that we may make. We are not undertaking any obligation to update any forward looking statements or other statements we may make in this document even though these statements may be affected by events or circumstances occurring after the forward looking statements or other statements were made. Therefore, no reader of this document should rely on these statements being current as of any time other than the time at which this document was filed with the Securities and Exchange Commission.
MGIC Investment Corporation - Q2 2023 | 2

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED June 30, 2023

Table of contents
|  | Page
PART I — FINANCIAL INFORMATION
Item 1 | Financial Statements: |
| Consolidated Balance Sheets - June 30, 2023 (Unaudited) and December 31, 2022 | 8
| Consolidated Statements of Operations (Unaudited) - Three and Six Months Ended June 30, 2023 and 2022 | 9
| Consolidated Statements of Comprehensive Income (Unaudited) - Three and Six Months Ended June 30, 2023 and 2022 | 10
| Consolidated Statements of Shareholders’ Equity (Unaudited) - Three and Six Months Ended June 30, 2023 and 2022 | 11
| Consolidated Statements of Cash Flows (Unaudited) - Three and Six Months Ended June 30, 2023 and 2022 | 12
| Notes to Consolidated Financial Statements (Unaudited) | 13
| Note 1 - Nature of Business and Basis of Presentation | 13
| Note 2 - Significant Accounting Policies | 14
| Note 3 - Debt | 14
| Note 4 - Reinsurance | 15
| Note 5 - Litigation and Contingencies | 19
| Note 6 - Earnings Per Share | 20
| Note 7 - Investments | 21
| Note 8 - Fair Value Measurements | 24
| Note 9 - Other Comprehensive Income | 27
| Note 10 - Benefit Plans | 28
| Note 11 - Loss Reserves | 29
| Note 12 - Shareholders’ Equity | 32
| Note 13 - Share-Based Compensation | 32
| Note 14 - Statutory Information | 33
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 34
Item 3 | Quantitative and Qualitative Disclosures about Market Risk | 61
Item 4 | Controls and Procedures | 61
PART II — OTHER INFORMATION
Item 1 | Legal Proceedings | 62
Item 1A | Risk Factors | 62
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 67
Item 5 | Other Information | 67
Item 6 | Exhibits | 67
INDEX TO EXHIBITS | 67
SIGNATURES | 68

MGIC Investment Corporation - Q2 2023 | 3

Glossary of terms and acronyms
/ A
ARMs
Adjustable rate mortgages
ABS
Asset-backed securities
ASC
Accounting Standards Codification
Available Assets
Assets, as designated under the PMIERs, that are readily available to pay claims, and include the most liquid investments
/ B
Book or book year
A group of loans insured in a particular calendar year
BPMI
Borrower-paid mortgage insurance
/ C
CECL
Current expected credit losses covered under ASC 326
CFPB
Consumer Financial Protection Bureau
CLO
Collateralized loan obligations
CMBS
Commercial mortgage-backed securities
COVID-19 Pandemic
An outbreak of the novel coronavirus disease, later named COVID-19. The outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency in the United States in March 2020
CRT
Credit risk transfer. The transfer of a portion of mortgage credit risk to the private sector through different forms of transactions and structures
/ D
DAC
Deferred insurance policy acquisition costs
Debt-to-income (“DTI”) ratio
The ratio, expressed as a percentage, of a borrower’s total debt payments to gross income
Delinquent Loan
A loan that is past due on a mortgage payment. A delinquent loan is typically reported to us by servicers when the loan has missed two or more payments. A loan will continue to be reported as delinquent until it becomes current, or a claim payment has been made. A delinquent loan is also referred to as a default
Delinquency Rate
The percentage of insured loans that are delinquent
Direct
Before giving effect to reinsurance
/ E
EPS
Earnings per share
/ F
Fannie Mae
Federal National Mortgage Association
FCRA
Fair Credit Reporting Act
FHA
Federal Housing Administration
FHFA
Federal Housing Finance Agency
FHLB
Federal Home Loan Bank of Chicago, of which MGIC is a member
FICO score
A measure of consumer credit risk provided by credit bureaus, typically produced from statistical models by Fair Isaac Corporation utilizing data collected by the credit bureaus
Freddie Mac
Federal Home Loan Mortgage Corporation
/ G
GAAP
Generally Accepted Accounting Principles in the United States
GSEs
Government Sponsored Enterprise. Collectively, Fannie Mae and Freddie Mac
/ H
HAMP
Home Affordable Modification Program
MGIC Investment Corporation - Q2 2023 | 4

HARP
Home Affordable Refinance Program
Home Re Entities
Unaffiliated special purpose insurers domiciled in Bermuda that participate in our aggregate XOL Transactions through the ILN market.
Home Re Transactions
Excess-of-loss reinsurance transactions with the Home Re Entities
HOPA
Homeowners Protection Act
HUD
Housing and Urban Development
/ I
IBNR Reserves
Loss reserves established on loans we estimate are delinquent, but for which the delinquency has not been reported to us
IIF
Insurance in force, which for loans insured by us, is equal to the unpaid principal balance, as reported to us
ILN
Insurance-linked notes
/ L
LAE
Loss adjustment expenses, which include the costs of settling claims, including legal and other expenses and general expenses of administering the claims settlement process.
Loan-to-value ("LTV") ratio
The ratio, expressed as a percentage, of the dollar amount of the first mortgage loan to the value of the property at the time the loan became insured and does not reflect subsequent housing price appreciation or depreciation. Subordinate mortgages may also be present.
Long-term debt:
5.25% Notes
5.25% Senior Notes due on August 15, 2028, with interest payable semi-annually on February 15 and August 15 of each year
9% Debentures
9% Convertible Junior Subordinated Debentures due on April 1, 2063, with interest payable semi-annually on April 1 and October 1 of each year
Loss ratio
The ratio, expressed as a percentage, of net losses incurred to net premiums earned
Low down payment loans or mortgages
Loans with less than 20% down payments
LPMI
Lender-paid mortgage insurance
/ M
MBS
Mortgage-backed securities
MD&A
Management's discussion and analysis of financial condition and results of operations
MGIC
Mortgage Guaranty Insurance Corporation, a subsidiary of MGIC Investment Corporation
MAC
MGIC Assurance Corporation, a subsidiary of MGIC
Minimum Required Assets
The minimum amount of Available Assets that must be held under the PMIERs which is based on an insurer’s book of RIF and is calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance transactions, and subject to a floor of $400 million.
MPP
Minimum Policyholder Position, as required under certain state requirements. The “policyholder position” of a mortgage insurer is its net worth or surplus, contingency reserve and a portion of the reserves for unearned premiums
/ N
N/A
Not applicable for the period presented
NAIC
The National Association of Insurance Commissioners
NIW
New Insurance Written, is the aggregate original principal amount of the mortgages that are insured during a period
N/M
Data, or calculation, deemed not meaningful for the period presented
NPL
Non-performing loan, which is a delinquent loan, at any stage in its delinquency
/ O
OCI
Office of the Commissioner of Insurance of the State of Wisconsin
MGIC Investment Corporation - Q2 2023 | 5

/ P
Persistency
The percentage of our insurance remaining in force from one year prior
PMI
Private Mortgage Insurance (as an industry or product type)
PMIERs
Private Mortgage Insurer Eligibility Requirements issued by each of Fannie Mae and Freddie Mac to set forth requirements that an approved insurer must meet and maintain to provide mortgage guaranty insurance on loans delivered to or acquired by Fannie Mae or Freddie Mac, as applicable.
Premium Yield
The ratio of premium earned divided by the average IIF outstanding for the period measured
Premium Rate
The contractual rate charged for coverage under our insurance policies
Primary Insurance
Insurance that provides mortgage default protection on individual loans.
Profit Commission
Payments we receive from reinsurers under each of our quota share reinsurance transactions if the annual loss ratio is below levels specified in the quota share reinsurance transaction
/ Q
QSR Transaction
Quota share reinsurance transaction with a group of unaffiliated reinsurers
2015 QSR
Our QSR transaction that provided coverage on eligible NIW written prior to 2017
2019 QSR
Our QSR transaction that provided coverage on eligible NIW in 2019
2020 QSR
Our QSR transactions that provides coverage on eligible NIW in 2020
2021 QSR
Our QSR transactions that provides coverage on eligible NIW in 2021
2022 QSR
Our QSR transactions that provides coverage on eligible NIW in 2022
2023 QSR
Our QSR transactions that provides coverage on eligible NIW in 2023
Credit Union QSR
Our QSR transaction that provides coverage on eligible NIW from credit union institutions originated from April 1, 2020 through December 31, 2025
/ R
RESPA
Real Estate Settlement Procedures Act
RIF
Risk in force, which for an individual loan insured by us, is equal to the unpaid loan principal balance, as reported to us, multiplied by the insurance coverage percentage. RIF is sometimes referred to as exposure
Risk-to-capital
Under certain state regulations, the ratio of RIF, net of reinsurance and exposure on policies currently in default and for which loss reserves have been established, to the level of statutory capital
RMBS
Residential mortgage-backed securities
/ S
State Capital Requirements
Under certain state regulations, the minimum amount of statutory capital relative to risk in force (or similar measure)
/ T
TILA
Truth in Lending Act
Traditional XOL Transaction
Excess-of-loss reinsurance transaction with a group of unaffiliated reinsurers
2022 Traditional XOL
Our XOL transaction that provides coverage on eligible NIW in 2022
2023 Traditional XOL
Our XOL transaction that provides coverage on eligible NIW in 2023
/ U
Underwriting expense ratio
The ratio, expressed as a percentage, of the other underwriting and operating expenses, net, and amortization of DAC of our combined insurance operations (which excludes underwriting and operating expenses of our non-insurance subsidiaries) to net premiums written
Underwriting profit
Net premiums earned minus losses incurred, net and other underwriting and operating expenses, net
MGIC Investment Corporation - Q2 2023 | 6

USDA
U.S. Department of Agriculture
/ V
VA
U.S. Department of Veterans Affairs
VIE
Variable interest entity
/ X
XOL Transactions
Excess-of-loss reinsurance transactions executed through the Home Re Transactions and the Traditional XOL Transactions
MGIC Investment Corporation - Q2 2023 | 7

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands) |  | Note |  | June 30, 2023 |  | December 31, 2022
|  |  |  |  | (Unaudited) |  |
ASSETS |  |  |  |  |  |
Investment portfolio: |  | 7 / 8 |  |  |  |
Fixed income, available-for-sale, at fair value (amortized cost 2023 - $6,056,298; 2022 - $5,926,785) |  |  |  | $ | 5,603,038 |  |  | $ | 5,409,698 |
Equity securities, at fair value (cost 2023 - $15,972; 2022 - $15,924) |  |  |  | 14,384 |  |  | 14,140 |
Other invested assets, at cost |  |  |  | 850 |  |  | 850 |
Total investment portfolio |  |  |  | 5,618,272 |  |  | 5,424,688 |
Cash and cash equivalents |  |  |  | 310,720 |  |  | 327,384 |
Restricted cash and cash equivalents |  |  |  | 6,004 |  |  | 5,529 |
Accrued investment income |  |  |  | 55,166 |  |  | 55,178 |
Reinsurance recoverable on loss reserves |  | 4 |  | 34,475 |  |  | 28,240 |
Reinsurance recoverable on paid losses |  | 4 |  | 240 |  |  | 18,081 |
Premiums receivable |  |  |  | 57,066 |  |  | 58,000 |
Home office and equipment, net |  |  |  | 39,699 |  |  | 41,419 |
Deferred insurance policy acquisition costs |  |  |  | 16,900 |  |  | 19,062 |
Deferred income taxes, net |  |  |  | 110,782 |  |  | 124,769 |
Other assets |  |  |  | 104,123 |  |  | 111,443 |
Total assets |  |  |  | $ | 6,353,447 |  |  | $ | 6,213,793 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |
Liabilities: |  |  |  |  |  |
Loss reserves |  | 11 |  | $ | 530,681 |  |  | $ | 557,988 |
Unearned premiums |  |  |  | 171,879 |  |  | 195,289 |
Senior notes |  | 3 |  | 642,460 |  |  | 641,724 |
Convertible junior subordinated debentures |  | 3 |  | 21,086 |  |  | 21,086 |
Other liabilities |  |  |  | 143,079 |  |  | 154,966 |
Total liabilities |  |  |  | 1,509,185 |  |  | 1,571,053 |
Contingencies |  | 5 |  |  |  |
Shareholders’ equity: |  | 12 |  |  |  |
Common stock (one dollar par value, shares authorized 1,000,000; shares issued 2023 - 371,353; 2022 - 371,353; shares outstanding 2023 - 283,416; 2022 - 293,433) |  |  |  | 371,353 |  |  | 371,353 |
Paid-in capital |  |  |  | 1,799,444 |  |  | 1,798,842 |
Treasury stock at cost (shares 2023 - 87,937; 2022 - 77,920) |  |  |  | (1,192,783) |  |  | (1,050,238) |
Accumulated other comprehensive income (loss), net of tax |  |  |  | (424,887) |  |  | (481,511) |
Retained earnings |  |  |  | 4,291,135 |  |  | 4,004,294 |
Total shareholders’ equity |  |  |  | 4,844,262 |  |  | 4,642,740 |
Total liabilities and shareholders’ equity |  |  |  | $ | 6,353,447 |  |  | $ | 6,213,793 |

See accompanying notes to consolidated financial statements.
MGIC Investment Corporation - Q2 2023 | 8

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30, |
(In thousands, except per share data) |  | Note |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Revenues: |  |  |  |  |  |  |  |  |  |  |
Premiums written: |  |  |  |  |  |  |  |  |  |  |
Direct |  |  |  | $ | 273,079 |  |  | $ | 276,536 |  |  | $ | 547,326 |  |  | $ | 551,329 |  |
Assumed |  |  |  | 3,017 |  |  | 2,055 |  |  | 5,768 |  |  | 4,086 |  |
Ceded |  | 4 |  | (44,872) |  |  | (34,270) |  |  | (91,678) |  |  | (68,429) |  |
Net premiums written |  |  |  | 231,224 |  |  | 244,321 |  |  | 461,416 |  |  | 486,986 |  |
Decrease in unearned premiums, net |  |  |  | 11,587 |  |  | 11,376 |  |  | 23,410 |  |  | 23,951 |  |
Net premiums earned |  |  |  | 242,811 |  |  | 255,697 |  |  | 484,826 |  |  | 510,937 |  |
Investment income, net of expenses |  |  |  | 52,340 |  |  | 40,305 |  |  | 101,563 |  |  | 78,567 |  |
Net gains (losses) on investments and other financial instruments |  | 7/8 |  | (4,987) |  |  | (4,746) |  |  | (12,685) |  |  | (5,518) |  |
Other revenue |  |  |  | 511 |  |  | 1,860 |  |  | 936 |  |  | 3,746 |  |
Total revenues |  |  |  | 290,675 |  |  | 293,116 |  |  | 574,640 |  |  | 587,732 |  |
Losses and expenses: |  |  |  |  |  |  |  |  |  |  |
Losses incurred, net |  | 11 |  | (17,691) |  |  | (99,058) |  |  | (11,245) |  |  | (118,372) |  |
Amortization of deferred policy acquisition costs |  |  |  | 2,609 |  |  | 2,982 |  |  | 5,087 |  |  | 5,722 |  |
Other underwriting and operating expenses, net |  |  |  | 53,998 |  |  | 53,449 |  |  | 124,061 |  |  | 108,181 |  |
Loss on debt extinguishment |  |  |  | — |  |  | 6,391 |  |  | — |  |  | 28,498 |  |
Interest expense |  |  |  | 9,377 |  |  | 13,461 |  |  | 18,751 |  |  | 28,373 |  |
Total losses and expenses |  |  |  | 48,293 |  |  | (22,775) |  |  | 136,654 |  |  | 52,402 |  |
Income before tax |  |  |  | 242,382 |  |  | 315,891 |  |  | 437,986 |  |  | 535,330 |  |
Provision for income tax |  |  |  | 51,328 |  |  | 66,623 |  |  | 92,385 |  |  | 111,049 |  |
Net income |  |  |  | $ | 191,054 |  |  | $ | 249,268 |  |  | $ | 345,601 |  |  | $ | 424,281 |  |
Earnings per share: |  |  |  |  |  |  |  |  |  |  |
Basic |  | 6 |  | $ | 0.67 |  |  | $ | 0.81 |  |  | $ | 1.20 |  |  | $ | 1.36 |  |
Diluted |  | 6 |  | $ | 0.66 |  |  | $ | 0.80 |  |  | $ | 1.19 |  |  | $ | 1.34 |  |
Weighted average common shares outstanding - basic |  | 6 |  | 285,906 |  |  | 308,840 |  |  | 288,434 |  |  | 312,388 |  |
Weighted average common shares outstanding - diluted |  | 6 |  | 289,566 |  |  | 313,545 |  |  | 292,125 |  |  | 319,012 |  |

See accompanying notes to consolidated financial statements.
MGIC Investment Corporation - Q2 2023 | 9

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | Note |  | 2023 |  | 2022 |  | 2023 |  | 2022
Net income |  |  |  | $ | 191,054 |  |  | $ | 249,268 |  |  | $ | 345,601 |  |  | $ | 424,281 |
Other comprehensive income (loss), net of tax: |  | 9 |  |  |  |  |  |  |  |
Change in unrealized investment gains and losses |  | 7 |  | (30,234) |  |  | (175,380) |  |  | 50,425 |  |  | (446,318) |
Benefit plan adjustments |  |  |  | 846 |  |  | 490 |  |  | 6,199 |  |  | 883 |
Other comprehensive income (loss), net of tax |  |  |  | (29,388) |  |  | (174,890) |  |  | 56,624 |  |  | (445,435) |
Comprehensive income (loss) |  |  |  | $ | 161,666 |  |  | $ | 74,378 |  |  | $ | 402,225 |  |  | $ | (21,154) |

See accompanying notes to consolidated financial statements.
MGIC Investment Corporation - Q2 2023 | 10

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | Note |  | 2023 |  | 2022 |  | 2023 |  | 2022
Common stock |  |  |  |  |  |  |  |  |  |
Balance, beginning and end of period |  |  |  | $ | 371,353 |  |  | $ | 371,353 |  |  | $ | 371,353 |  |  | $ | 371,353 |
Paid-in capital |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  |  |  | 1,791,609 |  |  | 1,783,611 |  |  | 1,798,842 |  |  | 1,794,906 |
Reissuance of treasury stock, net under share-based compensation plans |  |  |  | — |  |  | — |  |  | (16,912) |  |  | (17,867) |
Equity compensation |  |  |  | 7,835 |  |  | 7,769 |  |  | 17,514 |  |  | 14,341 |
Balance, end of period |  |  |  | 1,799,444 |  |  | 1,791,380 |  |  | 1,799,444 |  |  | 1,791,380 |
Treasury stock |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  |  |  | (1,119,048) |  |  | (793,696) |  |  | (1,050,238) |  |  | (675,265) |
Reissuance of treasury stock, net under share-based compensation plans |  |  |  | — |  |  | — |  |  | 9,713 |  |  | 9,179 |
Repurchase of common stock |  | 12 |  | (73,735) |  |  | (94,263) |  |  | (152,258) |  |  | (221,873) |
Balance, end of period |  |  |  | (1,192,783) |  |  | (887,959) |  |  | (1,192,783) |  |  | (887,959) |
Accumulated other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  |  |  | (395,499) |  |  | (150,848) |  |  | (481,511) |  |  | 119,697 |
Other comprehensive income (loss), net of tax |  | 9 |  | (29,388) |  |  | (174,890) |  |  | 56,624 |  |  | (445,435) |
Balance, end of period |  |  |  | (424,887) |  |  | (325,738) |  |  | (424,887) |  |  | (325,738) |
Retained earnings |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  |  |  | 4,129,229 |  |  | 3,399,935 |  |  | 4,004,294 |  |  | 3,250,691 |
Net income |  |  |  | 191,054 |  |  | 249,268 |  |  | 345,601 |  |  | 424,281 |
Cash dividends |  | 12 |  | (29,148) |  |  | (25,220) |  |  | (58,760) |  |  | (50,989) |
Balance, end of period |  |  |  | 4,291,135 |  |  | 3,623,983 |  |  | 4,291,135 |  |  | 3,623,983 |
Total shareholders’ equity |  |  |  | $ | 4,844,262 |  |  | $ | 4,573,019 |  |  | $ | 4,844,262 |  |  | $ | 4,573,019 |

See accompanying notes to consolidated financial statements.
MGIC Investment Corporation - Q2 2023 | 11

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|  | Six Months Ended June 30, |
(In thousands) |  | 2023 |  | 2022 |
Cash flows from operating activities: |  |  |  |  |
Net income |  | $ | 345,601 |  |  | $ | 424,281 |  |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization |  | 19,372 |  |  | 29,523 |  |
Deferred tax expense (benefit) |  | (1,065) |  |  | 3,378 |  |
Equity compensation |  | 17,514 |  |  | 14,341 |  | (1) |
Loss on debt extinguishment |  | — |  |  | 28,498 |  |
Net (gains) losses on investments and other financial instruments |  | 12,685 |  |  | 5,518 |  |
Change in certain assets and liabilities: |  |  |  |  |
Accrued investment income |  | 12 |  |  | 267 |  |
Reinsurance recoverable on loss reserves |  | (6,235) |  |  | 12,947 |  |
Reinsurance recoverable on paid losses |  | 17,841 |  |  | 35,965 |  |
Premium receivable |  | 934 |  |  | (1,007) |  |
Deferred insurance policy acquisition costs |  | 2,162 |  |  | 668 |  |
Profit commission receivable |  | 6,226 |  |  | (3,054) |  |
Loss reserves |  | (27,307) |  |  | (156,344) |  |
Unearned premiums |  | (23,410) |  |  | (23,951) |  |
Return premium accrual |  | (2,300) |  |  | (4,500) |  |
Current income taxes |  | 7,846 |  |  | 22,831 |  |
Other, net |  | (12,928) |  |  | (27,682) |  | (1) |
Net cash provided by (used in) operating activities |  | 356,948 |  |  | 361,679 |  |
Cash flows from investing activities: |  |  |  |  |
Purchases of investments |  | (830,773) |  |  | (375,754) |  |
Proceeds from sales of investments |  | 269,728 |  |  | 266,374 |  |
Proceeds from maturity of fixed income securities |  | 404,546 |  |  | 401,112 |  |
Proceeds from sale of equipment |  | 142 |  |  | — |  |
Additions to property and equipment |  | (671) |  |  | (2,146) |  |
Net cash provided by (used in) investing activities |  | (157,028) |  |  | 289,586 |  |
Cash flows from financing activities: |  |  |  |  |
Purchase of convertible junior subordinated debentures |  | — |  |  | (74,865) |  |
Repayment of FHLB Advance |  | — |  |  | (155,000) |  |
Cash portion of loss on debt extinguishment |  | — |  |  | (28,498) |  |
Repurchase of common stock |  | (150,192) |  |  | (219,073) |  |
Dividends paid |  | (58,718) |  |  | (50,838) |  |
Payment of withholding taxes related to share-based compensation net share settlement |  | (7,199) |  |  | (8,688) |  |
Net cash provided by (used in) financing activities |  | (216,109) |  |  | (536,962) |  |
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents |  | (16,189) |  |  | 114,303 |  |
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period |  | 332,913 |  |  | 304,958 |  |
Cash and cash equivalents and restricted cash and cash equivalents at end of period |  | $ | 316,724 |  |  | $ | 419,261 |  |
(1) Amounts have been reclassified to conform to the current year presentation |  |  |  |  |

See accompanying notes to consolidated financial statements.
MGIC Investment Corporation - Q2 2023 | 12

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Note 1. Nature of Business and Basis of Presentation
MGIC Investment Corporation is a holding company which, through Mortgage Guaranty Insurance Corporation (“MGIC”), is principally engaged in the mortgage insurance business. We provide mortgage insurance to lenders throughout the United States and to government sponsored entities to protect against loss from defaults on low down payment residential mortgage loans. MGIC Assurance Corporation (“MAC”) and MGIC Indemnity Corporation (“MIC”), insurance subsidiaries of MGIC, provide insurance for certain mortgages under Fannie Mae and Freddie Mac (the “GSEs”) credit risk transfer programs.
The accompanying unaudited consolidated financial statements of MGIC Investment Corporation and its wholly-owned subsidiaries have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission (“SEC”) for interim reporting and do not include all of the other information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2022 included in our 2022 Annual Report on Form 10-K. As used below, “we,” “our” and “us” refer to MGIC Investment Corporation’s consolidated operations or to MGIC Investment Corporation, as the context requires.
In the opinion of management, the accompanying financial statements include all adjustments, consisting primarily of normal recurring accruals, necessary to fairly state our consolidated financial position and consolidated results of operations for the periods indicated. The consolidated results of operations for an interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
The substantial majority of our NIW has been for loans purchased by the GSEs. The current private mortgage insurer eligibility requirements ("PMIERs") of the GSEs include financial requirements, as well as business, quality control and certain transactional approval requirements. 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, calculated from tables of factors with several risk dimensions). Based on our application of the PMIERs, as of June 30, 2023, MGIC’s Available Assets are in excess of its Minimum Required Assets; and MGIC is in compliance with the PMIERs and eligible to insure loans purchased by the GSEs.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
Subsequent events
We have considered subsequent events through the date of this filing.
MGIC Investment Corporation - Q2 2023 | 13

Note 2. Significant Accounting Policies
Recent accounting and reporting developments
Accounting standards and laws and regulations effective in 2023, or early adopted, and relevant to our financial statements are described below:
Reference Rate Reform: ASU 2022-06
In March 2020, the FASB issued ASU 2020-04 to provide temporary optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform. It provided optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. In December 2022, the FASB issued ASU 2022-06, extending the election and application from March 12, 2020 through December 31, 2024 (originally December 31, 2022). Future elections of this standard will ease, if warranted, the requirements for accounting for the future effects of reference rate reform. We have evaluated the impact the discontinuance of LIBOR will have on our consolidated financial statements and have determined it will not have a material impact.
Inflation Reduction Act
On August 16, 2022, the Inflation Reduction Act (the “IRA”) was enacted and signed into law in the United States. The IRA includes provisions for a 15% corporate minimum tax and a 1% excise tax on net stock repurchases. Both of these taxes are effective in 2023. We do not expect these tax provisions to have a material impact on our consolidated financial results, including our annual estimated effective tax rate. The amount of the excise tax on the repurchase of corporate stock was immaterial for the six months ended June 30, 2023.
Note 3. Debt
Debt obligations
The aggregate carrying values of our long-term debt obligations and their par values, if different, as of June 30, 2023 and December 31, 2022 are presented in table 3.1 below.

Long-term debt obligations
Table | 3.1 |  |  |  |
(In thousands) |  | June 30, 2023 |  | December 31, 2022
5.25% Notes, due August 2028 (par value: $650 million) |  | $ | 642,460 |  |  | $ | 641,724 |
9% Debentures, due April 2063 (1) |  | 21,086 |  |  | 21,086 |
Long-term debt, carrying value |  | $ | 663,546 |  |  | $ | 662,810 |

(1)Convertible at any time prior to maturity at the holder’s option, at a conversion rate, which is subject to adjustment, of 77.9620 shares per $1,000 principal amount, representing a conversion price of approximately $12.83 per share. The payment of dividends by our holding company results in adjustments to the conversion rate, with such adjustments generally deferred until the end of the year.
The 5.25% Senior Notes (5.25% Notes) and 9% Convertible Junior Subordinated Debentures (“9% Debentures”) are obligations of our holding company, MGIC Investment Corporation.
See Note 7 - “Debt” in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information pertaining to our debt obligations. As of June 30, 2023 we are in compliance with all of our debt covenants.
Interest payments
Interest payments for the six months ended June 30, 2023 and 2022 were $18.0 million and $29.2 million, respectively.
MGIC Investment Corporation - Q2 2023 | 14

Note 4. 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 June 30, |  | Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 284,636 |  |  | $ | 287,846 |  |  | $ | 570,670 |  |  | $ | 575,119 |
Assumed |  | 3,047 |  |  | 2,121 |  |  | 5,834 |  |  | 4,247 |
Ceded - quota share reinsurance (1) |  | (27,442) |  |  | (14,995) |  |  | (57,319) |  |  | (37,373) |
Ceded - excess-of-loss reinsurance |  | (17,430) |  |  | (19,275) |  |  | (34,359) |  |  | (31,056) |
Total ceded |  | (44,872) |  |  | (34,270) |  |  | (91,678) |  |  | (68,429) |
Net premiums earned |  | $ | 242,811 |  |  | $ | 255,697 |  |  | $ | 484,826 |  |  | $ | 510,937 |
Losses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | (15,706) |  |  | $ | (109,334) |  |  | $ | (4,583) |  |  | $ | (130,426) |
Assumed |  | (31) |  |  | (154) |  |  | (27) |  |  | (361) |
Ceded - quota share reinsurance |  | (1,954) |  |  | 10,430 |  |  | (6,635) |  |  | 12,415 |
Losses incurred, net |  | $ | (17,691) |  |  | $ | (99,058) |  |  | $ | (11,245) |  |  | $ | (118,372) |
Other Reinsurance Impacts: |  |  |  |  |  |  |  |
Profit commission on quota share reinsurance (1) |  | $ | 34,809 |  |  | $ | 48,814 |  |  | $ | 66,520 |  |  | $ | 87,794 |
Ceding commission on quota share reinsurance |  | 12,450 |  |  | 12,762 |  |  | 24,768 |  |  | 25,034 |

(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 quota share 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 annual loss ratios higher than we have experienced on our QSR Transactions.
Each of our QSR Transactions typically have annual loss ratio caps of 300% and lifetime loss ratios 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 |  | 2020 | 12.5 | % |  | 62.0 | % |  | December 31, 2031
2020 QSR and 2021 QSR |  | 2020 | 17.5 | % |  | 62.0 | % |  | December 31, 2032
2020 QSR and 2021 QSR |  | 2021 | 17.5 | % |  | 61.9 | % |  | December 31, 2032
2021 QSR and 2022 QSR |  | 2021 | 12.5 | % |  | 57.5 | % |  | December 31, 2032
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
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.
MGIC Investment Corporation - Q2 2023 | 15

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 | 2020 | June 30, 2023 | July 1, 2023 |  | 10.5% or 8%
2020 QSR and 2021 QSR | 2020 | June 30, 2023 | July 1, 2023 |  | 14.5% or 12%
2020 QSR and 2021 QSR | 2021 | December 31, 2023 | July 1, 2023 |  | 14.5% or 12%
2021 QSR and 2022 QSR | 2021 | December 31, 2023 | July 1, 2023 |  | 10.5% or 8%
2021 QSR and 2022 QSR | 2022 | December 31, 2024 | July 1, 2023 |  | 12.5% or 10%
2022 QSR and 2023 QSR | 2022 | December 31, 2024 | July 1, 2023 |  | 12.5% or 10%
2022 QSR and 2023 QSR | 2023 | December 31, 2025 | July 1, 2024 |  | 12.5% or 10%
2023 QSR | 2023 | December 31, 2025 | July 1, 2024 |  | 8% or 7%

(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.
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 $34.5 million as of June 30, 2023 and $28.2 million as of December 31, 2022. 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 quota share reinsurance agreements 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”).
We have entered into Traditional XOL Transactions with panels of third-party reinsurers. For the covered policies, 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.
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 to 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 collateral for 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.
MGIC Investment Corporation - Q2 2023 | 16

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 June 30, 2023, a "Trigger Event" has occurred on our Home Re 2019-1 ILN transaction because the reinsured principal balance of loans that were reported 60 or more days delinquent exceeded a percentage of the total reinsured principal balance of loans specified under each transaction. A "Trigger Event" has also occurred on the Home Re 2022-1 ILN transactions because the target level of credit enhancement on the most senior tranche has not been met.
Table 4.4a provides a summary of our XOL Transactions as of June 30, 2023.

Excess of Loss Reinsurance
Table 4.4a |  |  |  |  |  |
($ in thousands) | Issue Date | Policy In force Dates | Optional Call Date (1) | Legal Maturity | Initial First Layer Retention | Initial Excess of Loss Reinsurance Coverage
2023 Traditional XOL (2) | April 1, 2023 | January 1, 2023 - December 29, 2023 | January 1, 2031 | 10 years | TBD | TBD
2022 Traditional XOL | April 1, 2022 | January 1, 2022 - December 30, 2022 | January 1, 2030 | 10 years | $82,523 | $142,642
Home Re 2022-1, Ltd. | April 26, 2022 | May 29, 2021 - December 31, 2021 | April 25, 2028 | 12.5 years | 325,589 | 473,575
Home Re 2021-2, Ltd. | August 3, 2021 | January 1, 2021 - May 28, 2021 | July 25, 2028 | 12.5 years | 190,159 | 398,429
Home Re 2021-1, Ltd. | February 2, 2021 | August 1, 2020 - December 31, 2020 | January 25, 2028 | 12.5 years | 211,159 | 398,848
Home Re 2020-1, Ltd. | October 29, 2020 | January 1, 2020 - July 31, 2020 | October 25, 2027 | 10 years | 275,283 | 412,917
Home Re 2019-1, Ltd. | May 25, 2019 | January 1, 2018 - March 31, 2019 | May 25, 2026 | 10 years | 185,730 | 315,739
Home Re 2018-1, Ltd. | October 30, 2018 | July 1, 2016 - December 31, 2017 | October 25, 2025 | 10 years | 168,691 | 318,636

(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.
(2) The 2023 Traditional XOL Transaction provides up to $116 million of reinsurance coverage on eligible NIW in 2023.
Table 4.4b provides a summary of the remaining first layer retention and remaining excess of loss reinsurance coverage on our XOL Transactions as of June 30, 2023 and December 31, 2022.

Table 4.4b |  | Remaining First Layer Retention |  | Remaining Excess of Loss Reinsurance Coverage
($ in thousands) |  | June 30, 2023 |  | December 31, 2022 |  | June 30, 2023 |  | December 31, 2022
2022 Traditional XOL |  | $ | 82,490 |  |  | $ | 82,517 |  |  | $ | 142,642 |  |  | $ | 142,642 |
Home Re 2022-1, Ltd. |  | 325,317 |  |  | 325,576 |  |  | 473,575 |  |  | 473,575 |
Home Re 2021-2, Ltd. |  | 189,894 |  |  | 190,097 |  |  | 299,100 |  |  | 352,084 |
Home Re 2021-1, Ltd. |  | 210,961 |  |  | 211,102 |  |  | 229,325 |  |  | 277,053 |
Home Re 2020-1, Ltd. |  | 274,978 |  |  | 275,051 |  |  | 72,127 |  |  | 113,247 |
Home Re 2019-1, Ltd. |  | 183,000 |  |  | 183,540 |  |  | 208,146 |  |  | 208,146 |
Home Re 2018-1, Ltd. |  | 164,572 |  |  | 164,849 |  |  | 102,557 |  |  | 140,993 |

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 used to collateralize the Home Re Entity’s reinsurance obligation to MGIC. The amount of monthly reinsurance coverage premium ceded on the Home Re Transactions 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. The Home Re 2021-2 and Home Re 2022-1 Transactions reference SOFR. The remaining Home Re Transactions referenced one-month LIBOR, and transitioned to SOFR when the one-month LIBOR rate was no longer published. 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 June 30, 2023 and December 31, 2022, were not material to our consolidated balance sheet and the changes in fair value during the three and six months ended June 30, 2023 and June 30,
MGIC Investment Corporation - Q2 2023 | 17

2022 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 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 June 30, 2023, and December 31, 2022, 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 June 30, 2023 and December 31, 2022.

Home Re total assets |  |  |  |
Table | 4.5 |  |  |  |
(In thousands) |  | Total VIE Assets
Home Re Entity |  | June 30, 2023 |  | December 31, 2022
Home Re 2022-1 Ltd. |  | $ | 473,575 |  |  | $ | 473,575 |
Home Re 2021-2 Ltd. |  | 308,063 |  |  | 357,340 |
Home Re 2021-1 Ltd. |  | 236,095 |  |  | 285,039 |
Home Re 2020-1 Ltd. |  | 77,216 |  |  | 119,159 |
Home Re 2019-1 Ltd. |  | 208,146 |  |  | 208,146 |
Home Re 2018-1 Ltd. |  | 107,815 |  |  | 146,822 |

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”.)
MGIC Investment Corporation - Q2 2023 | 18

Note 5. Litigation and Contingencies
Before paying an insurance claim, generally we review the loan and servicing files to determine the appropriateness of the claim amount. When reviewing the files, we may determine that we have the right to rescind coverage or deny a claim on the loan (both referred to herein as “rescissions”). In addition, our insurance policies generally provide that we can reduce a claim if the servicer did not comply with its obligations under our insurance policy (such reduction referred to as a “curtailment”).
When the insured disputes our right to rescind coverage or curtail claims, we generally engage in discussions in an attempt to settle the dispute. If we are unable to reach a settlement, the outcome of a dispute ultimately may be determined by legal proceedings. 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. In those cases, until settlement negotiations or legal proceedings are concluded (including the receipt of any necessary GSE approvals), it is possible that we will record an additional loss.
From time to time, we are involved in 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.
MGIC Investment Corporation - Q2 2023 | 19

Note 6. Earnings per Share
Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of shares of common stock outstanding. For purposes of calculating basic EPS, vested restricted stock and restricted stock units (“RSUs”) are considered outstanding. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. The determination of whether components are dilutive is calculated independently for each period. We calculate diluted EPS using the treasury stock method and if-converted method. Under the treasury stock method, diluted EPS reflects the potential dilution that could occur if unvested RSUs result in the issuance of common stock. Under the if-converted method, diluted EPS reflects the potential dilution that could occur if our 9% Debentures result in the issuance of common stock. The determination of potentially issuable shares does not consider the satisfaction of the conversion requirements and the shares are included in the determination of diluted EPS as of the beginning of the period, if dilutive.
Table 6.1 reconciles the numerators and denominators used to calculate basic and diluted EPS.

Earnings per share |  |  |  |
Table | 6.1 |  |  |  |  |  |  |  |
|  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands, except per share data) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Basic earnings per share: |  |  |  |  |  |  |  |
Net income |  | $ | 191,054 |  |  | $ | 249,268 |  |  | $ | 345,601 |  |  | $ | 424,281 |
Weighted average common shares outstanding - basic |  | 285,906 |  |  | 308,840 |  |  | 288,434 |  |  | 312,388 |
Basic earnings per share |  | $ | 0.67 |  |  | $ | 0.81 |  |  | $ | 1.20 |  |  | $ | 1.36 |
Diluted earnings per share: |  |  |  |  |  |  |  |
Net income |  | $ | 191,054 |  |  | $ | 249,268 |  |  | $ | 345,601 |  |  | $ | 424,281 |
Interest expense, net of tax (1): |  |  |  |  |  |  |  |
9% Debentures |  | 375 |  |  | 719 |  |  | 750 |  |  | 2,231 |
Diluted income available to common shareholders |  | $ | 191,429 |  |  | $ | 249,987 |  |  | $ | 346,351 |  |  | $ | 426,512 |
Weighted average common shares outstanding - basic |  | 285,906 |  |  | 308,840 |  |  | 288,434 |  |  | 312,388 |
Effect of dilutive securities: |  |  |  |  |  |  |  |
Unvested RSUs |  | 2,016 |  |  | 1,613 |  |  | 2,047 |  |  | 1,821 |
9% Debentures |  | 1,644 |  |  | 3,092 |  |  | 1,644 |  |  | 4,803 |
Weighted average common shares outstanding - diluted |  | 289,566 |  |  | 313,545 |  |  | 292,125 |  |  | 319,012 |
Diluted earnings per share |  | $ | 0.66 |  |  | $ | 0.80 |  |  | $ | 1.19 |  |  | $ | 1.34 |

(1) Interest expense has been tax effected at a rate of 21%.
MGIC Investment Corporation - Q2 2023 | 20

Note 7. Investments
Fixed income securities
Our fixed income securities classified as available-for-sale at June 30, 2023 and December 31, 2022 are shown in tables 7.1a and 7.1b below.

Details of fixed income securities by category as of June 30, 2023
Table | 7.1a |  |  |  |  |  |  |  |  |  |
(In thousands) |  | Amortized Cost |  |  |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) |  | Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 185,239 |  |  |  |  | $ | 8 |  |  | $ | (8,871) |  |  | $ | 176,376 |
Obligations of U.S. states and political subdivisions |  | 2,208,970 |  |  |  |  | 3,996 |  |  | (214,788) |  |  | 1,998,178 |
Corporate debt securities |  | 2,542,461 |  |  |  |  | 1,040 |  |  | (178,099) |  |  | 2,365,402 |
ABS |  | 127,142 |  |  |  |  | 3 |  |  | (5,191) |  |  | 121,954 |
RMBS |  | 260,147 |  |  |  |  | 7 |  |  | (23,583) |  |  | 236,571 |
CMBS |  | 301,682 |  |  |  |  | 42 |  |  | (22,152) |  |  | 279,572 |
CLOs |  | 335,380 |  |  |  |  | 6 |  |  | (4,935) |  |  | 330,451 |
Foreign government debt |  | 4,486 |  |  |  |  | — |  |  | (743) |  |  | 3,743 |
Commercial paper |  | 90,791 |  |  |  |  | 1 |  |  | (1) |  |  | 90,791 |
Total fixed income securities (1) |  | $ | 6,056,298 |  |  |  |  | $ | 5,103 |  |  | $ | (458,363) |  |  | $ | 5,603,038 |

Details of fixed income securities by category as of December 31, 2022
Table | 7.1b |  |  |  |  |  |  |  |  |  |
(In thousands) |  | Amortized Cost |  |  |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) |  | Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 145,581 |  |  |  |  | $ | 2 |  |  | $ | (9,683) |  |  | $ | 135,900 |
Obligations of U.S. states and political subdivisions |  | 2,400,261 |  |  |  |  | 4,866 |  |  | (256,073) |  |  | 2,149,054 |
Corporate debt securities |  | 2,416,475 |  |  |  |  | 1,043 |  |  | (196,377) |  |  | 2,221,141 |
ABS |  | 126,723 |  |  |  |  | 5 |  |  | (6,041) |  |  | 120,687 |
RMBS |  | 223,743 |  |  |  |  | 10 |  |  | (25,744) |  |  | 198,009 |
CMBS |  | 257,785 |  |  |  |  | 22 |  |  | (20,591) |  |  | 237,216 |
CLOs |  | 337,656 |  |  |  |  | 5 |  |  | (7,829) |  |  | 329,832 |
Foreign government debt |  | 4,486 |  |  |  |  | — |  |  | (699) |  |  | 3,787 |
Commercial paper |  | 14,075 |  |  |  |  | — |  |  | (3) |  |  | 14,072 |
Total fixed income securities (1) |  | $ | 5,926,785 |  |  |  |  | $ | 5,953 |  |  | $ | (523,040) |  |  | $ | 5,409,698 |

(1)Includes Short-Term Fixed Income Securities of $172.8 million and $67.0 million at June 30, 2023 and December 31, 2022, respectively.
We had $11.9 million and $11.8 million of investments at fair value on deposit with various states as of June 30, 2023 and December 31, 2022, respectively, due to regulatory requirements of those state insurance departments.
In connection with our insurance and reinsurance activities within MAC and MIC, insurance subsidiaries of MGIC, we are required to maintain assets in trusts for the benefit of contractual counterparties, which had investments at fair value of $146.3 million and $128.4 million at June 30, 2023 and December 31, 2022, respectively.
MGIC Investment Corporation - Q2 2023 | 21

The amortized cost and fair values of fixed income securities at June 30, 2023, by contractual maturity, are shown in table 7.2 below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most mortgage and asset-backed securities provide for periodic payments throughout their lives, they are listed in separate categories.

Fixed income securities maturity schedule
Table | 7.2 |  |  |  |
|  | June 30, 2023
(In thousands) |  | Amortized cost |  | Fair Value
Due in one year or less |  | $ | 689,833 |  |  | $ | 680,414 |
Due after one year through five years |  | 1,544,694 |  |  | 1,465,881 |
Due after five years through ten years |  | 1,697,804 |  |  | 1,550,754 |
Due after ten years |  | 1,099,616 |  |  | 937,441 |
|  | 5,031,947 |  |  | 4,634,490 |
ABS |  | 127,142 |  |  | 121,954 |
RMBS |  | 260,147 |  |  | 236,571 |
CMBS |  | 301,682 |  |  | 279,572 |
CLOs |  | 335,380 |  |  | 330,451 |
Total |  | $ | 6,056,298 |  |  | $ | 5,603,038 |

Equity securities
The cost and fair value of investments in equity securities at June 30, 2023 and December 31, 2022 are shown in tables 7.3a and 7.3b below.

Details of equity security investments as of June 30, 2023
Table | 7.3a |  |  |  |  |  |  |  |
(In thousands) |  | Cost |  | Gross Gains |  | Gross Losses |  | Fair Value
Equity securities |  | $ | 15,972 |  |  | $ | 1 |  |  | $ | (1,589) |  |  | $ | 14,384 |

Details of equity security investments as of December 31, 2022
Table | 7.3b |  |  |  |  |  |  |  |
(In thousands) |  | Cost |  | Gross Gains |  | Gross Losses |  | Fair Value
Equity securities |  | $ | 15,924 |  |  | $ | — |  |  | $ | (1,784) |  |  | $ | 14,140 |

Net gains (losses) on investments and other financial instruments
The net gains (losses) on investments and other financial instruments and the proceeds from the sale of fixed income securities classified as available-for-sale and equity securities are shown in table 7.4 below.

Details of net gains (losses) on investments and other financial instruments |  |  |  |
Table | 7.4 | Three Months Ended June 30, |  | Six Months Ended June 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Fixed income securities |  |  |  |  |  |  |
Gains on sales | 107 |  |  | 987 |  |  | 166 |  |  | 5,121 |
Losses on sales | (6,415) |  |  | (1,093) |  |  | (10,548) |  |  | (5,750) |
Equity securities gains (losses) |  |  |  |  |  |  |
Market adjustment | (164) |  |  | (729) |  |  | 196 |  |  | (1,734) |
Change in embedded derivative on Home Re Transactions | 1,497 |  |  | (3,949) |  |  | (2,479) |  |  | (3,216) |
Other |  |  |  |  |  |  |
Gains (losses) on sales | (6) |  |  | 37 |  |  | — |  |  | 48 |
Market adjustment | (6) |  |  | 1 |  |  | (20) |  |  | 13 |
Net gains (losses) on investments and other financial instruments | (4,987) |  |  | (4,746) |  |  | (12,685) |  |  | (5,518) |
Proceeds from sales of fixed income securities | 236,777 |  |  | 46,730 |  |  | 268,958 |  |  | 263,554 |
Proceeds from sales of equity securities | — |  |  | — |  |  | — |  |  | — |

MGIC Investment Corporation - Q2 2023 | 22

Other invested assets
Our other invested assets balance includes an investment in FHLB stock that is carried at cost, which due to its nature approximates fair value. Ownership of FHLB stock provides access to a secured lending facility, subject to certain conditions, which includes requirements to post collateral and to maintain a minimum investment in FHLB stock.
Unrealized investment losses
Tables 7.5a and 7.5b below summarize, for all available-for-sale investments in an unrealized loss position at June 30, 2023 and December 31, 2022, the aggregate fair value and gross unrealized loss by the length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in tables 7.5a and 7.5b are estimated using the process described in Note 8 - “Fair Value Measurements” to these consolidated financial statements and in Note 3 - “Significant Accounting Policies” to the consolidated financial statements in our 2022 Annual Report on Form 10-K.

Unrealized loss aging for securities by type and length of time as of June 30, 2023
Table | 7.5a |  |  |  |  |  |  |  |  |  |  |  |
|  | Less Than 12 Months |  | 12 Months or Greater |  | Total
(In thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 76,161 |  |  | $ | (1,394) |  |  | $ | 93,067 |  |  | $ | (7,477) |  |  | $ | 169,228 |  |  | $ | (8,871) |
Obligations of U.S. states and political subdivisions |  | 586,294 |  |  | (10,085) |  |  | 1,077,509 |  |  | (204,703) |  |  | 1,663,803 |  |  | (214,788) |
Corporate debt securities |  | 754,768 |  |  | (15,548) |  |  | 1,639,146 |  |  | (162,551) |  |  | 2,393,914 |  |  | (178,099) |
ABS |  | 47,890 |  |  | (622) |  |  | 74,887 |  |  | (4,569) |  |  | 122,777 |  |  | (5,191) |
RMBS |  | 70,138 |  |  | (1,082) |  |  | 182,408 |  |  | (22,501) |  |  | 252,546 |  |  | (23,583) |
CMBS |  | 37,158 |  |  | (818) |  |  | 243,457 |  |  | (21,334) |  |  | 280,615 |  |  | (22,152) |
CLOs |  | 3,977 |  |  | (23) |  |  | 324,562 |  |  | (4,912) |  |  | 328,539 |  |  | (4,935) |
Foreign government debt |  | — |  |  | — |  |  | 3,743 |  |  | (743) |  |  | 3,743 |  |  | (743) |
Commercial paper |  | — |  |  | — |  |  | 1,999 |  |  | (1) |  |  | 1,999 |  |  | (1) |
Total |  | $ | 1,576,386 |  |  | $ | (29,572) |  |  | $ | 3,640,778 |  |  | $ | (428,791) |  |  | $ | 5,217,164 |  |  | $ | (458,363) |

Unrealized loss aging for securities by type and length of time as of December 31, 2022
Table | 7.5b |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Less Than 12 Months |  | 12 Months or Greater |  | Total
(In thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 67,531 |  |  | $ | (3,583) |  |  | $ | 76,246 |  |  | $ | (6,100) |  |  | $ | 143,777 |  |  | $ | (9,683) |
Obligations of U.S. states and political subdivisions |  | 1,344,272 |  |  | (157,903) |  |  | 360,956 |  |  | (98,170) |  |  | 1,705,228 |  |  | (256,073) |
Corporate debt securities |  | 1,488,255 |  |  | (109,976) |  |  | 758,732 |  |  | (86,401) |  |  | 2,246,987 |  |  | (196,377) |
ABS |  | 53,201 |  |  | (1,008) |  |  | 67,073 |  |  | (5,033) |  |  | 120,274 |  |  | (6,041) |
RMBS |  | 77,563 |  |  | (8,572) |  |  | 136,179 |  |  | (17,172) |  |  | 213,742 |  |  | (25,744) |
CMBS |  | 166,973 |  |  | (12,951) |  |  | 70,792 |  |  | (7,640) |  |  | 237,765 |  |  | (20,591) |
CLOs |  | 213,461 |  |  | (4,644) |  |  | 114,459 |  |  | (3,185) |  |  | 327,920 |  |  | (7,829) |
Foreign government debt |  | — |  |  | — |  |  | 3,787 |  |  | (699) |  |  | 3,787 |  |  | (699) |
Commercial paper |  | — |  |  | — |  |  | 3,816 |  |  | (3) |  |  | 3,816 |  |  | (3) |
Total |  | $ | 3,411,256 |  |  | $ | (298,637) |  |  | $ | 1,592,040 |  |  | $ | (224,403) |  |  | $ | 5,003,296 |  |  | $ | (523,040) |

There were 1,223 and 1,226 securities in an unrealized loss position at June 30, 2023 and December 31, 2022, respectively. Based on current facts and circumstances, we believe the unrealized losses as of June 30, 2023 presented in table 7.5a above are not indicative of the ultimate collectability of the current amortized cost of the securities. The unrealized losses in all categories of our investments at June 30, 2023 were primarily caused by an increase in prevailing interest rates. We also rely upon estimates of several credit and non-credit factors in our review and evaluation of individual investments to determine whether a credit impairment exists. All of the securities in an unrealized loss position are current with respect to their interest obligations.
MGIC Investment Corporation - Q2 2023 | 23

Note 8. Fair Value Measurements
Recurring fair value measurements
The following describes the valuation methodologies generally used by the independent pricing sources, or by us, to measure financial instruments at fair value, including the general classification of such financial instruments pursuant to the valuation hierarchy.
•Fixed income securities:
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies: Securities with valuations derived from quoted prices for identical instruments in active markets that we can access are categorized in Level 1 of the fair value hierarchy. Securities valued by surveying the dealer community, obtaining relevant trade data, benchmark quotes and spreads and incorporating this information in the valuation process are categorized as Level 2 of the fair value hierarchy.
Corporate Debt Securities are valued by surveying the dealer community, obtaining relevant trade data, benchmark quotes and spreads and incorporating this information into the valuation process. These securities are generally categorized in Level 2 of the fair value hierarchy.
Obligations of U.S. States & Political Subdivisions are valued by tracking, capturing, and analyzing quotes for active issues and trades reported via the Municipal Securities Rulemaking Board records. Daily briefings and reviews of current economic conditions, trading levels, spread relationships, and the slope of the yield curve provide further data for evaluation. These securities are generally categorized in Level 2 of the fair value hierarchy.
Residential Mortgage-Backed Securities ("RMBS") are valued by monitoring interest rate movements, and other pertinent data daily. Incoming market data is enriched to derive spread, yield and/or price data as appropriate, enabling known data points to be extrapolated for valuation application across a range of related securities. These securities are generally categorized in Level 2 of the fair value hierarchy.
Commercial Mortgage-Backed Securities ("CMBS") are valued using techniques that reflect market participants’ assumptions and maximize the use of relevant observable inputs including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. Evaluation uses regular reviews of the inputs for securities covered, including executed trades, broker quotes, credit information, collateral attributes and/or cash flow waterfall as applicable. These securities are generally categorized in Level 2 of the fair value hierarchy.
Asset-Backed Securities ("ABS") are valued using spreads and other information solicited from market buy-and-sell-side sources, including primary and secondary dealers, portfolio managers, and research analysts. Cash flows are generated for each tranche, benchmark yields are determined, and deal collateral performance and tranche level attributes including trade activity, bids, and offers are applied, resulting in tranche specific prices. These securities are generally categorized in Level 2 of the fair value hierarchy.
Collateralized loan obligations ("CLOs") are valued by evaluating manager rating, seniority in the capital structure, assumptions about prepayment, default and recovery and their impact on cash flow generation. Loan level net asset values are determined and aggregated for tranches and as a final step prices are checked against available recent trade activity. These securities are generally categorized in Level 2 of the fair value hierarchy.
Foreign government debt is valued by surveying the dealer community, obtaining relevant trade data, benchmark quotes and spreads and incorporating this information into the valuation process. These securities are generally categorized in Level 2 of the fair value hierarchy.
Commercial Paper, which has an original maturity greater than 90 days, is valued using market data for comparable instruments of similar maturity and average yields. These securities are generally categorized in Level 2 of the fair value hierarchy.
•Equity securities: Consist of actively traded, exchange-listed equity securities, including exchange traded funds (“ETFs”) and Bond Mutual Funds, with valuations derived from quoted prices for identical assets in active markets that we can access. These securities are valued in Level 1 of the fair value hierarchy.
•Cash Equivalents: Consists of money market funds and treasury bills with valuations derived from quoted prices for identical assets in active markets that we can access. These securities are valued in level 1 of the fair value hierarchy. Instruments in this category valued using market data for comparable instruments are classified as level 2 in the fair value hierarchy.
MGIC Investment Corporation - Q2 2023 | 24

Assets measured at fair value, by hierarchy level, as of June 30, 2023 and December 31, 2022 are shown in tables 8.1a and 8.1b below. The fair value of the assets is estimated using the process described above, and more fully in Note 3 - “Significant Accounting Policies” to the consolidated financial statements in our 2022 Annual Report on Form 10-K.

Assets carried at fair value by hierarchy level as of June 30, 2023
Table | 8.1a |  |  |  |  |  |  |  |
(In thousands) |  | Total Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  |
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 176,376 |  |  | $ | 96,805 |  |  | $ | 79,571 |  |  |
Obligations of U.S. states and political subdivisions |  | 1,998,178 |  |  | — |  |  | 1,998,178 |  |  |
Corporate debt securities |  | 2,365,402 |  |  | — |  |  | 2,365,402 |  |  |
ABS |  | 121,954 |  |  | — |  |  | 121,954 |  |  |
RMBS |  | 236,571 |  |  | — |  |  | 236,571 |  |  |
CMBS |  | 279,572 |  |  | — |  |  | 279,572 |  |  |
CLOs |  | 330,451 |  |  | — |  |  | 330,451 |  |  |
Foreign government debt |  | 3,743 |  |  | — |  |  | 3,743 |  |  |
Commercial paper |  | 90,791 |  |  | — |  |  | 90,791 |  |  |
Total fixed income securities |  | 5,603,038 |  |  | 96,805 |  |  | 5,506,233 |  |  |
Equity securities |  | 14,384 |  |  | 14,384 |  |  | — |  |  |
Cash equivalents |  | 313,229 |  | (1) | 296,783 |  |  | 16,446 |  |  |
Total |  | $ | 5,930,651 |  |  | $ | 407,972 |  |  | $ | 5,522,679 |  |  |

Assets carried at fair value by hierarchy level as of December 31, 2022
Table | 8.1b |  |  |  |  |  |  |  |
(In thousands) |  | Total Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  |
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 135,900 |  |  | $ | 116,897 |  |  | $ | 19,003 |  |  |
Obligations of U.S. states and political subdivisions |  | 2,149,054 |  |  | — |  |  | 2,149,054 |  |  |
Corporate debt securities |  | 2,221,141 |  |  | — |  |  | 2,221,141 |  |  |
ABS |  | 120,687 |  |  | — |  |  | 120,687 |  |  |
RMBS |  | 198,009 |  |  | — |  |  | 198,009 |  |  |
CMBS |  | 237,216 |  |  | — |  |  | 237,216 |  |  |
CLOs |  | 329,832 |  |  | — |  |  | 329,832 |  |  |
Foreign government debt |  | 3,787 |  |  | — |  |  | 3,787 |  |  |
Commercial paper |  | 14,072 |  |  | — |  |  | 14,072 |  |  |
Total fixed income securities |  | 5,409,698 |  |  | 116,897 |  |  | 5,292,801 |  |  |
Equity securities |  | 14,140 |  |  | 14,140 |  |  | — |  |  |
Cash equivalents |  | 328,756 |  | (1) | 324,129 |  |  | 4,627 |  |  |
Total |  | $ | 5,752,594 |  |  | $ | 455,166 |  |  | $ | 5,297,428 |  |  |
(1) Includes restricted cash equivalents |  |  |  |

Certain financial instruments, including insurance contracts, are excluded from these fair value disclosure requirements. The carrying values of cash (Level 1) and accrued investment income (Level 2) approximated their fair values. Additional fair value disclosures related to our investment portfolio are included in Note 7 – “Investments.”
In addition to the assets carried at fair value discussed above, we have embedded derivatives carried at fair value related to our Home Re Transactions that are classified as “Other liabilities” or “Other assets” in our consolidated balance sheets. The estimated fair value related to our embedded derivatives reflects the present value impact of the variation in investment income on the assets held by the reinsurance trusts and the contractual reference rate on the Home Re Transactions used to calculate the reinsurance premiums we estimate we will pay over the estimated remaining life. These liabilities or assets are categorized in Level 3 of the fair value hierarchy. At June 30, 2023 and December 31, 2022, the fair value of the embedded derivatives was an asset of less than $0.1 million and $2.5 million, respectively. (See Note 4 - "Reinsurance" for more information about our reinsurance programs.)
MGIC Investment Corporation - Q2 2023 | 25

Real estate acquired through claim settlement is carried at fair values and is reported in “Other assets” on the consolidated balance sheet. These assets are categorized as Level 3 of the fair value hierarchy. For the six months ended June 30, 2023 and 2022, purchases of real estate acquired were $0.1 million and $1.5 million, respectively. For the six months ended June 30, 2023, and 2022, sales of real estate acquired were $1.2 million and $2.4 million, respectively.
Financial assets and liabilities not measured at fair value
Other invested assets include an investment in FHLB stock that is carried at cost, which due to restrictions that require it to be redeemed or sold only to the security issuer at par value, approximates fair value. The fair value of other invested assets is categorized as Level 2.
Financial liabilities include our outstanding debt obligations. The fair values of our 5.25% Notes and 9% Debentures were based on observable market prices. In all cases the fair values of the financial liabilities below are categorized as level 2.
Table 8.2 presents the carrying value and fair value of our financial assets and liabilities disclosed, but not carried, at fair value at June 30, 2023 and December 31, 2022.

Financial assets and liabilities not measured at fair value
Table | 8.2 |  |  |  |  |  |  |  |
|  | June 30, 2023 |  | December 31, 2022
(In thousands) |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial assets |  |  |  |  |  |  |  |
Other invested assets |  | $ | 850 |  |  | $ | 850 |  |  | $ | 850 |  |  | $ | 850 |
Financial liabilities |  |  |  |  |  |  |  |
5.25% Senior Notes |  | 642,460 |  |  | 614,725 |  |  | 641,724 |  |  | 600,938 |
9% Convertible Junior Subordinated Debentures |  | 21,086 |  |  | 29,297 |  |  | 21,086 |  |  | 28,085 |
Total financial liabilities |  | $ | 663,546 |  |  | $ | 644,022 |  |  | $ | 662,810 |  |  | $ | 629,023 |

MGIC Investment Corporation - Q2 2023 | 26

Note 9. Other Comprehensive Income
The pretax and related income tax benefit (expense) components of our other comprehensive income (loss) for the three and six months ended June 30, 2023 and 2022 are included in table 9.1 below.

Components of other comprehensive income (loss) |  |  |  |
Table | 9.1 |  |  |  |  |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Net unrealized investment (losses) gains arising during the period |  | $ | (38,270) |  |  | $ | (222,000) |  |  | $ | 63,829 |  |  | $ | (564,960) |
Total income tax benefit (expense) |  | 8,036 |  |  | 46,620 |  |  | (13,404) |  |  | 118,642 |
Net of taxes |  | (30,234) |  |  | (175,380) |  |  | 50,425 |  |  | (446,318) |
Net changes in benefit plan assets and obligations |  | 1,071 |  |  | 620 |  |  | 7,847 |  |  | 1,118 |
Total income tax benefit (expense) |  | (225) |  |  | (130) |  |  | (1,648) |  |  | (235) |
Net of taxes |  | 846 |  |  | 490 |  |  | 6,199 |  |  | 883 |
Total other comprehensive income (loss) |  | $ | (37,199) |  |  | (221,380) |  |  | 71,676 |  |  | (563,842) |
Total income tax benefit (expense) |  | 7,811 |  |  | 46,490 |  |  | (15,052) |  |  | 118,407 |
Total other comprehensive income (loss), net of tax |  | $ | (29,388) |  |  | $ | (174,890) |  |  | $ | 56,624 |  |  | $ | (445,435) |

The pretax and related income tax benefit (expense) components of the amounts reclassified from our accumulated other comprehensive income (loss) (“AOCI”) to our consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 are included in table 9.2 below.

Reclassifications from AOCI |  |  |  |
Table | 9.2 |  |  |  |  |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Reclassification adjustment for net realized (losses) gains(1) |  | $ | (5,771) |  |  | $ | (2,433) |  |  | $ | (9,935) |  |  | $ | 2,408 |
Income tax benefit (expense) |  | 1,212 |  |  | 511 |  |  | 2,086 |  |  | (506) |
Net of taxes |  | (4,559) |  |  | (1,922) |  |  | (7,849) |  |  | 1,902 |
Reclassification adjustment related to benefit plan assets and obligations (2) |  | (1,071) |  |  | (620) |  |  | (10,003) |  |  | (1,118) |
Income tax benefit (expense) |  | 225 |  |  | 130 |  |  | 2,101 |  |  | 235 |
Net of taxes |  | (846) |  |  | (490) |  |  | (7,902) |  |  | (883) |
Total reclassifications |  | (6,842) |  |  | (3,053) |  |  | (19,938) |  |  | 1,290 |
Income tax benefit (expense) |  | 1,437 |  |  | 641 |  |  | 4,187 |  |  | (271) |
Total reclassifications, net of tax |  | $ | (5,405) |  |  | $ | (2,412) |  |  | $ | (15,751) |  |  | $ | 1,019 |

(1)Increases (decreases) Net realized investment gains (losses) on the consolidated statements of operations.
(2)Decreases (increases) Other underwriting and operating expenses, net on the consolidated statements of operations.
A rollforward of AOCI for the six months ended June 30, 2023, including amounts reclassified from AOCI, are included in table 9.3 below.

Rollforward of AOCI
Table | 9.3 |  |  |  |  |  |
|  |  | Six Months Ended June 30, 2023
(In thousands) |  | Net unrealized gains and (losses) on available-for-sale securities |  | Net benefit plan assets and (obligations) recognized in shareholders' equity |  | Total accumulated other comprehensive income (loss)
Balance at December 31, 2022, net of tax |  | $ | (408,496) |  |  | $ | (73,015) |  |  | $ | (481,511) |
Other comprehensive income (loss) before reclassifications |  | 42,576 |  |  | (1,703) |  |  | 40,873 |
Less: Amounts reclassified from AOCI |  | (7,849) |  |  | (7,902) |  |  | (15,751) |
Balance, June 30, 2023, net of tax |  | $ | (358,071) |  |  | $ | (66,816) |  |  | $ | (424,887) |

MGIC Investment Corporation - Q2 2023 | 27

Note 10. Benefit Plans
Tables 10.1 and 10.2 provide the components of net periodic benefit cost for our pension, supplemental executive retirement and other postretirement benefit plans for the three and six months ended June 30, 2023 and 2022.

Components of net periodic benefit cost
Table | 10.1 |  |  |  |  |  |  |  |
|  | Three Months Ended June 30,
|  | Pension and Supplemental Executive Retirement Plans |  | Other Postretirement Benefit Plans
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Company service cost |  | $ | — |  |  | $ | 1,869 |  |  | $ | 362 |  |  | $ | 306 |
Interest cost |  | 3,299 |  |  | 2,848 |  |  | 418 |  |  | 171 |
Expected return on plan assets |  | (3,425) |  |  | (4,864) |  |  | (2,054) |  |  | (2,626) |
Amortization of: |  |  |  |  |  |  |  |
Net actuarial losses (gains) |  | 530 |  |  | 1,349 |  |  | (11) |  |  | (798) |
Prior service cost (credit) |  | 86 |  |  | (53) |  |  | 466 |  |  | 122 |
Cost of settlements and curtailments |  | 1,000 |  |  | — |  |  | — |  |  | — |
Net periodic benefit cost (benefit) |  | $ | 1,490 |  |  | $ | 1,149 |  |  | $ | (819) |  |  | $ | (2,825) |
Components of net periodic benefit cost
Table | 10.2 |  |  |  |  |  |  |  |
|  | Six Months Ended June 30,
|  | Pension and Supplemental Executive Retirement Plans |  | Other Postretirement Benefit Plans
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Company service cost |  | $ | — |  |  | $ | 3,626 |  |  | $ | 748 |  |  | $ | 654 |
Interest cost |  | 6,981 |  |  | 5,725 |  |  | 816 |  |  | 348 |
Expected return on plan assets |  | (7,006) |  |  | (9,816) |  |  | (4,117) |  |  | (5,251) |
Amortization of: |  |  |  |  |  |  |  |
Net actuarial losses (gains) |  | 1,127 |  |  | 2,532 |  |  | (75) |  |  | (1,552) |
Prior service cost (credit) |  | 172 |  |  | (106) |  |  | 931 |  |  | 244 |
Cost of settlements and curtailments |  | 8,847 |  |  | — |  |  | — |  |  | — |
Net periodic benefit cost (benefit) |  | $ | 10,121 |  |  | $ | 1,961 |  |  | $ | (1,697) |  |  | $ | (5,557) |

Effective January 1, 2023, the defined benefit pension plan and supplemental executive retirement plan are frozen (no future benefits will be accrued for participants due to employment and no new participants will be added). Participants in these plans are fully vested in their benefits.
MGIC Investment Corporation - Q2 2023 | 28

Note 11. Loss Reserves
We establish case reserves and LAE reserves on delinquent loans that were reported to us as two or more payments past due and have not become current or resulted in a claim payment. Such loans are referred to as being in our delinquency inventory. Case reserves are established by estimating the number of loans in our delinquency inventory that will result in a claim payment, which is referred to as the claim rate, and further estimating the amount of the claim payment, which is referred to as claim severity.
IBNR reserves are established for estimated losses from delinquencies we estimate have occurred prior to the close of an accounting period but have not yet been reported to us. IBNR reserves are also established using estimated claim rates and claim severities.
Estimation of losses is inherently judgmental. Even in a stable environment, changes to our estimates could result in a material impact to our consolidated results of operations and financial position. The conditions that affect the claim rate and claim severity include the current and future state of the domestic economy, including unemployment and the current and future strength of local housing markets; exposure on insured loans; the amount of time between delinquency and claim filing (all else being equal, the longer the period between delinquency and claim filing, the greater the severity); and curtailments and rescissions. The actual amount of the claim payments may be substantially different than our loss reserve estimates. Our estimates could be adversely affected by several factors, including a deterioration of regional or national economic conditions, including unemployment, leading to a reduction in borrowers’ income and thus their ability to make mortgage payments, the impact of past and future government initiatives and actions taken by the GSEs (including mortgage forbearance programs and foreclosure moratoriums), and a drop in housing values which may affect borrower willingness to continue to make mortgage payments when the value of the home is below the mortgage balance. Loss reserves in future periods will also be dependent on the number of loans reported to us as delinquent.
Changes to our estimates could result in a material impact to our consolidated results of operations and financial position, even in a stable economic environment. Given the uncertainty of the macroeconomic environment, including the effectiveness of loss mitigation efforts, change in home prices, and changes in unemployment, our loss reserve estimates may continue to be impacted.
In considering the potential sensitivity of the factors underlying our estimate of loss reserves, it is possible that even a relatively small change in our estimated claim rate or claim severity could have a material impact on loss reserves and, correspondingly, on our consolidated results of operations even in a stable economic environment. For example, as of June 30, 2023, assuming all other factors remain constant, a $1,000 increase/decrease in the average severity reserve factor would change the loss reserve amount by approximately +/- $9 million. A one percentage point increase/decrease in the average claim rate reserve factor would change the loss reserve amount by approximately +/- $15 million.
The “Losses incurred” section of table 11.1 below shows losses incurred on delinquencies that occurred in the current year and in prior years. The amount of losses incurred relating to delinquencies that occurred in the current year represents the estimated amount to be ultimately paid on such delinquencies. The amount of losses incurred relating to delinquencies that occurred in prior years represents the difference between the actual claim rate and claim severity associated with those delinquencies resolved in the current year compared to the estimated claim rate and claim severity at the prior year-end, as well as a re-estimation of amounts to be ultimately paid on delinquencies continuing from the end of the prior year. This re-estimation of the claim rate and claim severity is the result of our review of current trends in the delinquency inventory, such as percentages of delinquencies that have resulted in a claim, the amount of the claims relative to the average loan exposure, changes in the relative level of delinquencies by geography and changes in average loan exposure.
Losses incurred on delinquencies that occurred in the current year increased for the six months ended June 30, 2023, compared to the same period last year. The increase is primarily due to an increase in estimated severity on current year delinquencies.
For the six months ended June 30, 2023 and June 30, 2022 we experienced favorable loss development of $100.7 million and $186.6 million, respectively, on previously received delinquencies. 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.
MGIC Investment Corporation - Q2 2023 | 29

The “Losses paid” section of table 11.1 below shows the amount of losses paid on delinquencies that occurred in the current year and losses paid on delinquencies that occurred in prior years. Foreclosure moratoriums and forbearance plans in place have increased the average time it takes to receive a claim.
Table 11.1 provides a reconciliation of beginning and ending loss reserves as of and for the six months ended June 30, 2023 and 2022.

Development of reserves for losses and loss adjustment expenses
Table | 11.1 |  |  |  |
|  |  | Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022
Reserve at beginning of period |  | $ | 557,988 |  |  | $ | 883,522 |
Less reinsurance recoverable |  | 28,240 |  |  | 66,905 |
Net reserve at beginning of period |  | 529,748 |  |  | 816,617 |
Losses incurred: |  |  |  |
Losses and LAE incurred in respect of delinquency notices received in: |  |  |  |
Current year |  | 89,465 |  |  | 68,210 |
Prior years (1) |  | (100,710) |  |  | (186,582) |
Total losses incurred |  | (11,245) |  |  | (118,372) |
Losses paid: |  |  |  |
Losses and LAE paid in respect of delinquency notices received in: |  |  |  |
Current year |  | 25 |  |  | 116 |
Prior years |  | 22,272 |  |  | 24,909 |
Total losses paid |  | 22,297 |  |  | 25,025 |
Net reserve at end of period |  | 496,206 |  |  | 673,220 |
Plus reinsurance recoverable |  | 34,475 |  |  | 53,958 |
Reserve at end of period |  | $ | 530,681 |  |  | $ | 727,178 |

(1)A positive number for prior year loss reserve development indicates a deficiency of prior year reserves. A negative number for prior year loss reserve development indicates a redundancy of prior year loss reserves. See the following table for more information about prior year loss reserve development.
The prior year loss reserve development for the six months ended June 30, 2023 and 2022 is shown in table 11.2 below.

Reserve development on previously received delinquencies
Table | 11.2 |  |  |  |
|  |  | Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022
Increase (decrease) in estimated claim rate on primary defaults |  | $ | (99,148) |  |  | $ | (186,163) |
Change in estimates related to severity on primary defaults, pool reserves, LAE reserves, reinsurance, and other |  | (1,562) |  |  | (419) |
Total prior year loss development (1) |  | $ | (100,710) |  |  | $ | (186,582) |

(1)A positive number for prior year loss reserve development indicates a deficiency of prior year loss reserves. A negative number for prior year loss reserve development indicates a redundancy of prior year loss reserves.
MGIC Investment Corporation - Q2 2023 | 30

Delinquency inventory
A rollforward of our primary delinquency inventory for the three and six months ended June 30, 2023 and 2022 appears in table 11.3 below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers.

Delinquency inventory rollforward |  |  |  |
Table | 11.3 |  |  |  |  |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Delinquency inventory at beginning of period |  | 24,757 |  |  | 30,462 |  |  | 26,387 |  |  | 33,290 |
New notices |  | 10,580 |  |  | 9,396 |  |  | 21,877 |  |  | 20,099 |
Cures |  | (11,156) |  |  | (12,677) |  |  | (23,763) |  |  | (25,877) |
Paid claims |  | (348) |  |  | (319) |  |  | (659) |  |  | (641) |
Rescissions and denials |  | (10) |  |  | (7) |  |  | (19) |  |  | (16) |
Delinquency inventory at end of period |  | 23,823 |  | 26,855 |  | 23,823 |  | 26,855

Table 11.4 below shows the number of consecutive months a borrower is delinquent. Historically as a delinquency ages it is more likely to result in a claim.

Primary delinquency inventory - consecutive months delinquent
Table | 11.4 |  |  |
| June 30, 2023 | December 31, 2022 | June 30, 2022
3 months or less | 7,663 |  | 8,820 |  | 6,791 |
4-11 months | 8,070 |  | 8,217 |  | 7,946 |
12 months or more (1) | 8,090 |  | 9,350 |  | 12,118 |
Total | 23,823 |  | 26,387 |  | 26,855 |
3 months or less | 32 | % | 33 | % | 25 | %
4-11 months | 34 | % | 31 | % | 30 | %
12 months or more | 34 | % | 36 | % | 45 | %
Total | 100 | % | 100 | % | 100 | %
Primary claims received inventory included in ending delinquent inventory | 291 |  | 267 |  | 254 |

(1)Approximately 41%, 36%, and 29% of the primary delinquency inventory delinquent for 12 consecutive months or more has been delinquent for at least 36 consecutive months as of June 30, 2023, December 31, 2022, and June 30, 2022, respectively.
Premium refunds
Our estimate of premiums to be refunded on expected claim payments is accrued for separately in “Other Liabilities” on our consolidated balance sheets and approximated $23.2 million and $25.5 million at June 30, 2023 and December 31, 2022, respectively.
MGIC Investment Corporation - Q2 2023 | 31

Note 12. Shareholders’ Equity
Share repurchase programs
Repurchases of our common stock may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. In the first six months of 2023, we repurchased 10.8 million shares at an average cost of $14.04 per share, which included commissions. In 2022, we repurchased approximately 27.8 million shares of our common stock, at an average cost of $13.89 per share, which included commissions. At June 30, 2023, we had $463 million remaining under a $500 million share repurchase program approved by our Board of Directors in 2023 that expires on July 1, 2025. In July 2023, we repurchased an additional 1.1 million shares totaling $18.5 million under the remaining authorization.
Cash dividends
In the first and second quarters of 2023, we paid quarterly cash dividends of $0.10 per share which totaled $58.8 million. On July 27, 2023, the Board of Directors declared a quarterly cash dividend to holders of the company’s common stock of $0.115 per share to shareholders of record on August 10, 2023, payable on August 24, 2023.
Note 13. Share-Based Compensation
We have certain share-based compensation plans. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period which generally corresponds to the vesting period. Awards under our plans generally vest over periods ranging from one to three years, although awards to our non-employee directors vest immediately.
Table 13.1 shows the number of restricted stock units (RSUs) granted to employees and non-employee directors and the weighted average fair value per share during the periods presented (shares in thousands).

Restricted stock unit grants
Table | 13.1 |  |  |  |  |  |
|  |  | Six months ended June 30,
|  |  | 2023 |  | 2022
|  |  | RSUs Granted (in thousands) | Weighted Average Share Fair Value |  | RSUs Granted (in thousands) | Weighted Average Share Fair Value
RSUs subject to performance conditions | (1) | 949 |  | $ | 14.17 |  |  | 848 |  | $ | 15.46 |
RSUs subject only to service conditions |  | 354 |  | 14.17 |  |  | 316 |  | 15.46 |
Non-employee director RSUs |  | 106 |  | 14.17 |  |  | 104 |  | 15.32 |

(1)Shares granted are subject to performance conditions under which the target number of shares granted may vest up to 200%.
MGIC Investment Corporation - Q2 2023 | 32

Note 14. Statutory Information
Statutory Capital Requirements
The insurance laws of 16 jurisdictions, including Wisconsin, our 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. We refer to these requirements as the “State Capital Requirements” and, together with the GSE Financial Requirements, as the “Financial Requirements.” While they vary among jurisdictions, the most common State Capital Requirements allow for a maximum risk-to-capital ratio of 25 to 1. 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 minimum policyholder position (“MPP”). MGIC’s “policyholder position” includes its net worth or surplus, and its contingency loss reserve.
At June 30, 2023, MGIC’s risk-to-capital ratio was 9.9 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 $2.1 billion. The calculation of our risk-to-capital ratio and MPP reflect credit for the risk ceded under our reinsurance transactions. If MGIC is not allowed an agreed level of credit under either the State Capital Requirements or the financial requirements of the PMIERs, MGIC may terminate the reinsurance agreements without penalty.
Dividend restrictions
MGIC is subject to statutory regulations as to payment of dividends. The maximum amount of dividends that MGIC may pay in any twelve-month period without regulatory approval by the OCI is the lesser of adjusted statutory net income or 10% of statutory policyholders’ surplus as of the preceding calendar year end. Adjusted statutory net income is defined for this purpose to be the greater of statutory net income, net of realized investment gains, for the calendar year preceding the date of the dividend or statutory net income, net of realized investment gains, for the three calendar years preceding the date of the dividend less dividends paid within the first two of the preceding three calendar years. The maximum dividend that could be paid, without regulatory approval, is reduced by dividends paid in the twelve months preceding the dividend payment date. Before making any dividend payments, we will notify the OCI to ensure it does not object. In May 2023, MGIC paid a $300 million dividend to MGIC Investment Corporation.
The OCI recognizes only statutory accounting principles prescribed, or practices permitted by the State of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company. The OCI has adopted certain prescribed accounting practices that differ from those found in other states. Specifically, Wisconsin domiciled companies record changes in the contingency loss reserves through their income statement as a change in underwriting deduction. As a result, in periods in which MGIC is increasing contingency loss reserves, statutory net income is reduced.
Statutory Financial Information
The statutory net income, policyholders’ surplus, and contingency loss reserves of our insurance subsidiaries, including MGIC, are shown in table 14.1.

Financial information of our insurance subsidiaries (including MGIC)
Table 14.1 |  |  |  |
|  | As of and for the Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022
Statutory net income |  | $ | 135,182 |  |  | $ | 252,345 |
Statutory policyholders' surplus |  | 778,893 |  |  | 1,072,481 |
Contingency loss reserves |  | 4,936,541 |  |  | 4,397,971 |

MGIC Investment Corporation - Q2 2023 | 33

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following is management’s discussion and analysis of the financial condition and results of operations of MGIC Investment Corporation for the second quarter of 2023. As used below, “we” and “our” refer to MGIC Investment Corporation’s consolidated operations. This form 10-Q should be read in conjunction with “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. See the “Glossary of terms and acronyms” for definitions and descriptions of terms used throughout this MD&A. Our revenues and losses could be affected by the Risk Factors referred to under “Forward Looking Statements and Risk Factors” below, and they are an integral part of the MD&A.
Forward Looking and Other Statements
As discussed under “Forward Looking Statements and Risk Factors” below, actual results may differ materially from the results contemplated by forward looking statements. These forward looking statements speak only as of the date of this filing and are subject to change without notice. We are not undertaking any obligation to update any forward looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward looking statements or other statements were made. Therefore, no reader of this document should rely on these statements being current as of any time other than the time at which this document was filed with the Securities and Exchange Commission.
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Overview

Summary financial results of MGIC Investment Corporation |  |  |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions, except per share data, unaudited) |  | 2023 |  | 2022 |  | % Change |  | 2023 |  | 2022 |  | % Change
Selected statement of operations data |  |  |  |  |  |  |  |  |  |  |  |
Net premiums earned | $ | 242.8 |  |  | $ | 255.7 |  |  | (5) |  |  | $ | 484.8 |  |  | $ | 510.9 |  |  | (5) |
Investment income, net of expenses |  | 52.3 |  |  | 40.3 |  |  | 30 |  |  | 101.6 |  |  | 78.6 |  |  | 29 |
Losses incurred, net |  | (17.7) |  |  | (99.1) |  |  | (82) |  |  | (11.2) |  |  | (118.4) |  |  | (91) |
Other underwriting and operating expenses, net |  | 54.0 |  |  | 53.4 |  |  | 1 |  |  | 124.1 |  |  | 108.2 |  |  | 15 |
Loss on debt extinguishment |  | — |  |  | 6.4 |  |  | N/M |  | — |  |  | 28.5 |  |  | N/M
Income before tax |  | 242.4 |  |  | 315.9 |  |  | (23) |  |  | 438.0 |  |  | 535.3 |  |  | (18) |
Provision for income taxes |  | 51.3 |  |  | 66.6 |  |  | (23) |  |  | 92.4 |  |  | 111.0 |  |  | (17) |
Net income |  | 191.1 |  |  | 249.3 |  |  | (23) |  |  | 345.6 |  |  | 424.3 |  |  | (19) |
Diluted income per share |  | $ | 0.66 |  |  | $ | 0.80 |  |  | (18) |  |  | $ | 1.19 |  |  | $ | 1.34 |  |  | (11) |
Non-GAAP Financial Measures (1) |  |  |  |  |  |  |  |  |  |  |  |
Adjusted pre-tax operating income |  | $ | 248.7 |  |  | $ | 322.4 |  |  | (23) |  |  | $ | 448.4 |  |  | $ | 564.4 |  |  | (21) |
Adjusted net operating income |  | 196.0 |  |  | 254.4 |  |  | (23) |  |  | 353.8 |  |  | 447.3 |  |  | (21) |
Adjusted net operating income per diluted share |  | $ | 0.68 |  |  | $ | 0.81 |  |  | (16) |  |  | $ | 1.21 |  |  | $ | 1.41 |  |  | (14) |

(1) See “Explanation and reconciliation of our use of Non-GAAP financial measures.”
Summary of second quarter 2023 results
Comparative quarterly results
We recorded second quarter 2023 net income of $191.1 million, or $0.66 per diluted share. Net income decreased by $58.2 million from net income of $249.3 million, or $0.80 per diluted share, in the prior year. The decrease is primarily due to increases 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 the provision for income taxes. Diluted income per share decreased primarily due to a decrease in net income, partially offset by a decrease in the number of diluted weighted shares outstanding.
Adjusted net operating income for the second quarter 2023 was $196.0 million (Q2 2022: $254.4 million) and adjusted net operating income per diluted share was $0.68 (Q2 2022: $0.81). The decrease in 2023 adjusted net operating income compared to 2022 primarily reflects a decrease in a net income. The decrease in 2023 adjusted net operating income per diluted share compared to 2022 primarily reflects a decrease in adjusted net operating income, partially offset by a decrease in the number of diluted weighted shares outstanding.
Premiums earned for the three months ended June 30, 2023, were $242.8 million, compared with $255.7 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.
Net investment income in the three months ended June 30, 2023, was $52.3 million, compared with $40.3 million, in the prior year. The increase in net investment income was due to an increase of 80 basis points in the average investment yields.
Losses incurred, net for the second quarter of 2023 were $(17.7) million, compared with $(99.1) million for the same period last year. While new delinquency notices added approximately $42.2 million for the three months ended June 30, 2023, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of approximately $59.9 million. For the three months ended June 30, 2022, new delinquency notices added approximately $31.8 million, offset by our re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of approximately $130.9 million. 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.
We did not repurchase any of our outstanding debt obligations in the second quarter of 2023. For the three months ended June 30, 2022, we recorded a loss on debt extinguishment of $6.4 million, related to the repurchase of a portion our 9% Debentures at costs that were in excess of their carrying value.
The decrease in our provision for income taxes in the second quarter of 2023 as compared to the same period in the prior year was primarily due to a decrease in income before tax.
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Comparative year to date results
We recorded net income of $345.6 million, or $1.19 per diluted share. Net income decreased by $78.7 million, from net income of $424.3 million, or $1.34 per diluted share, in the prior year. The decrease is primarily due to increases in losses incurred and other underwriting and operating expenses, 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. Diluted income per share decreased primarily due to a decrease in net income, partially offset by a decrease in the number of diluted weighted shares outstanding.
Adjusted net operating income for the six months ended June 30, 2023, was $353.8 million (2022: $447.3 million) and adjusted net operating income per diluted share was $1.21 (2022: $1.41). The decrease in 2023 adjusted net operating income compared to 2022 primarily reflects a decrease in net income. The decrease in 2023 adjusted net operating income per diluted share compared to 2022 primarily reflects a decrease in adjusted net operating income, partially offset by a decrease in the number of diluted weighted shares outstanding.
Premiums earned for the six months ended June 30, 2023, were $484.8 million, compared with $510.9 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.
Net investment income in the six months ended June 30, 2023, was $101.6 million, compared with $78.6 million, in the prior year. The increase in net investment income was due to an increase of 80 bps in the average investment yields.
Losses incurred, net for the six months ended June 30, 2023 were $(11.2) million, compared with losses incurred of $(118.4) million for the prior year. While new delinquency notices added $89.5 million to losses incurred, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of $100.7 million. In the first six months of 2022, new delinquency notices added approximately $68.2 million to losses incurred, offset by re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of $186.6 million. 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.
Underwriting and other expenses, net for the six months ended June 30, 2023, and 2022, were $124.1 million and $108.2 million, respectively. Underwriting and other expenses, net increased during the first half of 2023, compared with the same period in the prior year primarily due to an increase in pension expenses as a result of settlement accounting charges, an increase in performance based employee compensation, and an increase in postretirement benefit expenses, partially offset by a decrease in expenses related to professional and consulting services.
We did not repurchased any of our outstanding debt obligations in the first half 2023. For the six months ended June 30, 2022, we recorded a loss on debt extinguishment of $28.5 million, related to the repurchase of a portion our 9% Debentures in excess of their carrying value and a repayment fee on the repayment of the FHLB Advance.
The decrease in our provision for income taxes in the first half of 2023 as compared to the same period in the prior year was primarily due to a decrease in income before tax.
Capital
MGIC dividend payments to our holding company
The ability of MGIC to pay dividends is restricted by insurance regulation. Amounts in excess of prescribed limits are deemed “extraordinary” and may not be paid if disapproved by the OCI. 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. In the six months ended June 30, 2023, and 2022, we made dividend payments to the holding company of $300 million and $400 million, respectively. Future dividend payments to the holding company will continue to be determined in consultation with the board.
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. In the six months ended June 30, 2023, we repurchased 10.8 million shares of common stock, using approximately $150.9 million of holding company resources. As of June 30, 2023, we had $463 million of authorization remaining to repurchase our common stock through July 1, 2025 under a $500 million share repurchase program approved by our Board of Directors in April of 2023. As of June 30, 2023, we had approximately 283 million shares of common stock outstanding. We repurchased 15.7 million shares during the six months ended June 30, 2022, using approximately $222 million of holding company resources.
Dividends to shareholders
In the first and second quarters of 2023, we paid quarterly cash dividends of $0.10 per share which totaled $58.8 million. On July 27, 2023, the Board of Directors declared a quarterly cash dividend to holders of the company’s common stock of $0.115 per share to shareholders of record on August 10, 2023, payable on August 24, 2023.
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GSEs
We must comply with a GSE’s PMIERs to be eligible to insure loans delivered to or purchased by that GSE. The PMIERs include financial requirements, as well as business, quality control and certain transaction approval requirements. 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, 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). Based on our interpretation of the PMIERs as of June 30, 2023, MGIC’s Available Assets totaled $5.8 billion, or $2.3 billion in excess of its Minimum Required Assets.
The PMIERs generally require us to hold significantly more Minimum Required Assets for delinquent loans than for performing loans and the Minimum Required Assets required to be held increases as the number of payments missed on a delinquent loan increases.
If MGIC ceases to be eligible to insure loans purchased by one or both of the GSEs, it would significantly reduce the volume of our NIW, the substantial majority of which is for loans delivered to or purchased by the GSEs. In addition to the increase in Minimum Required Assets associated with delinquent loans, factors that may negatively impact MGIC’s ability to continue to comply with the financial requirements of the PMIERs include the following:

è | The GSEs may make the PMIERs more onerous in the future. The PMIERs provide that the factors that determine Minimum Required Assets will be updated periodically, or as needed if there is a significant change in macroeconomic conditions or loan performance. We do not anticipate that the regular periodic updates will occur more frequently than once every two years. The PMIERs state that the GSEs will provide notice 180 days prior to the effective date of updates to the factors; however, the GSEs may amend the PMIERs at any time.
è | The PMIERS may be changed in response to the final regulatory capital framework for the GSEs which was published in February 2022.
è | Our future operating results may be negatively impacted by the matters discussed in our Risk Factors. Such matters could decrease our revenues, increase our losses or require the use of assets, thereby creating a shortfall in Available Assets.
è | Should capital be needed by MGIC in the future, capital contributions from our holding company may not be available due to competing demands on holding company resources, including for repayment of debt.

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 on similar terms, and our reinsurance subjects us to counterparty credit risk. Our access to reinsurance may be disrupted and the terms under which we are able to obtain reinsurance may be less attractive than in the past due to volatility stemming from circumstances such as higher interest rates, increased inflation, global events such as the Russia-Ukraine war, and other factors. Since 2022, execution of transactions for XOL reinsurance through the ILN market has been more challenging, with increased pricing, transactions being down-sized, and generally fewer transactions being executed by mortgage insurers.
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. 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. If MGIC is not allowed certain levels of credit under the PMIERs, under certain circumstances, MGIC may terminate the reinsurance transactions without penalties.
GSE reform
The FHFA has been the conservator of the GSEs since 2008 and has the authority to control and direct their operations. 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.
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 is uncertain. 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 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.”
State Regulations
The insurance laws of 16 jurisdictions, including Wisconsin, our domiciliary state, require a mortgage insurer to maintain a minimum amount of statutory capital relative to its RIF (or a similar measure) in order for the mortgage insurer to continue to write new business. We refer to these requirements as the “State Capital Requirements.” While they vary among jurisdictions, the most common State Capital Requirements allow for a maximum risk-to-capital ratio of 25 to 1. 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 an MPP. MGIC’s “policyholder position” includes its net worth or surplus and its contingency reserve.
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At June 30, 2023, MGIC’s risk-to-capital ratio was 9.9 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 $2.1 billion. The calculation of our risk-to-capital ratio and MPP reflect full credit for the risk ceded under our reinsurance transactions. 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. 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” for more information about matters that could negatively impact our compliance with State Capital Requirements.
The NAIC previously announced plans to revise the minimum capital and surplus requirements for mortgage insurers that are provided for in its Mortgage Guaranty Insurance Model Act. In 2019, a working group of state regulators released an exposure draft of a revised Mortgage Guaranty Insurance Model Act and a risk-based capital framework to establish capital requirements for mortgage insurers. Subsequent drafts and a final version released in May 2023 did not include changes to the capital requirements of the existing Model Act. In July 2023, the NAIC working group voted to adopt the version of the Model Act released in May 2023, with some additional changes, but no changes to the capital requirements. It is expected that the full NAIC will adopt the revised Model Act sometime during 2023, but it is uncertain when the revised Model Act will be adopted in any jurisdiction and whether any changes will be made by state legislatures prior to such adoption.
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. 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 changing climatic conditions on our business are uncertain. 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.”
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. Many factors affect NIW, including the volume of low down payment home mortgage originations and competition to provide credit enhancement on those mortgages from the FHA, the VA, other mortgage insurers, and other alternatives to mortgage insurance, including GSE programs that may reduce or eliminate the demand for mortgage insurance. NIW does not include loans previously insured by us that are modified, such as loans modified under HARP.
•Cancellations, which reduce IIF. Cancellations due to refinancings are affected by the level of current mortgage interest rates compared to the mortgage coupon rates throughout the in force book, current home values compared to values when the loans in the in force book were insured and the terms on which mortgage credit is available. Home price appreciation can give homeowners the right to cancel mortgage insurance on their loans if sufficient home equity is achieved. Cancellations also result from policy rescissions, which require us to return any premiums received on the rescinded policies and claim payments, which require us to return any premium received on the related policies from the date of default on the insured loans. Cancellations of single premium policies, which are generally non-refundable, result in immediate recognition of any remaining unearned premium.
•Premium rates, which are affected by product type, competitive pressures, the risk characteristics of the insured loans, the percentage of coverage on the insured loans, and PMIERs capital requirements. The substantial majority of our monthly and annual mortgage insurance premiums are under premium plans for which, for the first ten years of the policy, the amount of premium is determined by multiplying the initial premium rate by the original loan balance; thereafter, the premium rate resets to a lower rate used for the remaining life of the policy. The remainder of our monthly and annual premiums are under premium plans for which premiums are determined by a fixed percentage of the loan’s amortizing balance over the life of the policy.
•Premiums ceded, net of profit commission, under our QSR Transactions and premiums ceded under our XOL Transactions are primarily affected by the percentage of our IIF subject to our reinsurance transactions. The profit commission under our QSR Transactions also varies inversely with the level of ceded losses incurred on a “dollar for dollar” basis and can be eliminated at ceded loss levels higher than what we have experienced on our QSR Transactions. As a result, lower levels of losses incurred result in a higher profit commission and less benefit from ceded losses incurred; higher levels of losses incurred result in more benefit from ceded losses incurred and a lower profit commission (or for certain levels of accident year loss ratios, its elimination). (See Note 4 - “Reinsurance” to our consolidated financial statements for a discussion of our reinsurance transactions.)
Premiums earned are generated by the insurance that is in force during all or a portion of the period. A change in the average IIF in the current period compared to an earlier period is a factor that will increase (when the average in force is higher) or reduce (when it is
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lower) premiums written and earned in the current period, although this effect may be enhanced (or mitigated) by the factors discussed above.
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. As measured by amortized cost (which excludes changes in fair value, such as from changes in interest rates), the size of the investment portfolio is mainly a function of cash generated from (or used in) operations, such as net premiums written, investment income, net claim payments and expenses, and cash provided by (or used for) non-operating activities, such as debt or stock issuances or repurchases, and dividends.
Losses incurred
Losses incurred are the current expense that reflects claim payments, costs of settling claims, and changes in our estimates of payments that will ultimately be made as a result of delinquencies on insured loans. As explained under “Critical Accounting Estimates” in our 2022 10-K MD&A, except in the case of a premium deficiency reserve, we recognize an estimate of this expense only for delinquent loans. Prior to the COVID-19 pandemic, 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. 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. Our estimated loss reserves incorporate our estimates of future rescissions of policies and curtailments of claims, and reversals of rescissions and curtailments. We collectively refer to such rescissions and denials as “rescissions” and variations of this term. We call reductions to claims “curtailments.”
•The distribution of claims over the life of a book. 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. 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. See Note 4 - “Reinsurance” to our consolidated financial statements for a discussion of our reinsurance transactions.
Underwriting and other expenses
Underwriting and other expenses includes items such as employee compensation, fees for professional and consulting services, depreciation and maintenance expense, and premium taxes, and are reported net of ceding commissions associated with our QSR Transactions. Employee compensation expenses are variable due to share-based compensation, changes in benefits, and changes in headcount (which can fluctuate due to volume of NIW). See Note 4 - “Reinsurance” to our consolidated financial statements for a discussion of ceding commission on our QSR Transactions.
Interest expense
Interest expense reflects the interest associated with our consolidated outstanding debt obligations discussed in Note 3 - “Debt” to our consolidated financial statements and under “Liquidity and Capital Resources” below.
Other
Certain activities that we do not consider being part of our fundamental operating activities may also impact our results of operations and are described below.
Gains (losses) on investments and other financial instruments
•Fixed income securities. Investment gains and losses reflect the difference between the amount received on the sale of a fixed income security and the fixed income security’s cost basis, as well as any credit allowances and any impairments on securities we intend to sell prior to recovery of its amortized cost basis. 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.
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•Financial instruments. Investment gains and losses on the embedded derivative on our Home Re Transactions reflect the present value impact of the variation in investment income on assets on the insurance-linked notes held by the reinsurance trusts and the contractual reference rate used to calculate the reinsurance premiums we estimate we will pay over the estimated remaining life.
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. Extinguishing our outstanding debt obligations early through these discretionary activities may result in losses primarily driven by the payment of consideration in excess of our carrying value, and the write off of unamortized debt issuance costs on the extinguished portion of the debt.
Refer to “Explanation and reconciliation of our use of Non-GAAP financial measures” below to understand how these items impact our evaluation of our core financial performance.
Mortgage insurance earnings and cash flow cycle
In general, the majority of any underwriting profit that a book generates occurs in the early years of the book, with the largest portion of any underwriting profit realized in the first year following the year the book was written. Subsequent years of a book may result in either underwriting profit or underwriting losses. This pattern of results typically occurs because relatively few of the incurred losses on delinquencies that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments) and increasing losses. 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.
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. Federal and state laws designed to promote the protection of such information require businesses that collect or maintain personal information to adopt information security programs, and to notify individuals, and in some jurisdictions, regulatory authorities, of security breaches involving personally identifiable information. 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. 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. 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.
While we have information security policies and systems in place to secure our information technology systems and to prevent unauthorized access to or disclosure of sensitive information, there can be no assurance with respect to our systems and those of our third-party vendors that unauthorized access to the systems or disclosure of the sensitive information, either through the actions of third parties or employees, will not occur. 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.
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Explanation and reconciliation of our use of non-GAAP financial measures
Non-GAAP financial measures
We believe that use of the Non-GAAP financial measures of adjusted pre-tax operating income (loss), adjusted net operating income (loss) and adjusted net operating income (loss) per diluted share facilitate the evaluation of the company's core financial performance thereby providing relevant information to investors. These measures are not recognized in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance.
Adjusted pre-tax operating income (loss) is defined as GAAP income (loss) before tax, excluding the effects of net realized investment gains (losses), gain and losses on debt extinguishment, and infrequent or unusual non-operating items where applicable.
Adjusted net operating income (loss) is defined as GAAP net income (loss) excluding the after-tax effects of net realized investment gains (losses), gain and losses on debt extinguishment and infrequent or unusual non-operating items where applicable. The amounts of adjustments to components of pre-tax operating income (loss) are tax effected using a federal statutory tax rate of 21%.
Adjusted net operating income (loss) per diluted share is calculated in a manner consistent with the accounting standard regarding earnings per share by dividing (i) adjusted net operating income (loss) after making adjustments for interest expense on convertible debt, whenever the impact is dilutive by (ii) diluted weighted average common shares outstanding, which reflects share dilution from unvested restricted stock units and from convertible debt when dilutive under the “if-converted” method.
Although adjusted pre-tax operating income (loss) and adjusted net operating income (loss) exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items represent items that are: (1) not viewed as part of the operating performance of our primary activities; or (2) impacted by both discretionary and other economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, along with the reasons for their treatment, are described below. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these adjustments. Other companies may calculate these measures differently. Therefore, their measures may not be comparable to those used by us.
(1)Net realized investment gains (losses). The recognition of net realized investment gains or losses can vary significantly across periods as the timing of individual securities sales is highly discretionary and is influenced by such factors as market opportunities, our tax and capital profile, and overall market cycles.
(2)Gains and losses 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.
(3)Infrequent or unusual non-operating items. Items that are non-recurring in nature and are not part of our primary operating activities.
MGIC Investment Corporation - Q2 2023 | 41

Non-GAAP reconciliations |
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income |
|  | Three Months Ended June 30, |
|  | 2023 |  | 2022 |
(In thousands, except per share amounts) |  | Pre-tax |  | Tax effect |  | Net (after-tax) |  | Pre-tax |  | Tax effect |  | Net (after-tax) |
Income before tax / Net income |  | $ | 242,382 |  |  | 51,328 |  |  | $ | 191,054 |  |  | $ | 315,891 |  |  | 66,623 |  |  | $ | 249,268 |  |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |
Loss on debt extinguishment |  | — |  |  | — |  |  | — |  |  | 6,391 |  |  | 1,342 |  |  | 5,049 |  |
Net realized investment (gains) losses |  | 6,314 |  |  | 1,326 |  |  | 4,988 |  |  | 69 |  |  | 14 |  |  | 55 |  |
Adjusted pre-tax operating income / Adjusted net operating income |  | $ | 248,696 |  |  | $ | 52,654 |  |  | $ | 196,042 |  |  | $ | 322,351 |  |  | $ | 67,979 |  |  | $ | 254,372 |  |
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share |
Weighted average diluted shares outstanding |  |  |  |  |  | 289,566 |  |  |  |  |  |  | 313,545 |  |
Net income per diluted share |  |  |  |  |  | $ | 0.66 |  |  |  |  |  |  | $ | 0.80 |  |
Loss on debt extinguishment |  |  |  |  |  | — |  |  |  |  |  |  | 0.02 |  |
Net realized investment (gains) losses |  |  |  |  |  | 0.02 |  |  |  |  |  |  | — |  |
Adjusted net operating income per diluted share |  |  |  |  |  | $ | 0.68 |  |  |  |  |  |  | $ | 0.81 |  | (1) |
(1) Does not foot due to rounding. |  |  |  |  |  |  |  |  |  |  |  |  |
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income |
|  | Six Months Ended June 30, |
|  | 2023 |  | 2022 |
(In thousands, except per share amounts) |  | Pre-tax |  | Tax effect |  | Net (after-tax) |  | Pre-tax |  | Tax effect |  | Net (after-tax) |
Income before tax / Net income |  | $ | 437,986 |  |  | $ | 92,385 |  |  | $ | 345,601 |  |  | $ | 535,330 |  |  | $ | 111,049 |  |  | $ | 424,281 |  |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |
Loss on debt extinguishment |  | — |  |  | — |  |  | — |  |  | 28,498 |  |  | 5,985 |  |  | 22,513 |  |
Net realized investment (gains) losses |  | 10,382 |  |  | 2,180 |  |  | 8,202 |  |  | 581 |  |  | 122 |  |  | 459 |  |
Adjusted pre-tax operating income / Adjusted net operating income |  | $ | 448,368 |  |  | $ | 94,565 |  |  | $ | 353,803 |  |  | $ | 564,409 |  |  | $ | 117,156 |  |  | $ | 447,253 |  |
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share |
Weighted average diluted shares outstanding |  |  |  |  |  | 292,125 |  |  |  |  |  |  | 319,012 |  |
Net income per diluted share |  |  |  |  |  | $ | 1.19 |  |  |  |  |  |  | $ | 1.34 |  |
Loss on debt extinguishment |  |  |  |  |  | — |  |  |  |  |  |  | 0.07 |  |
Net realized investment (gains) losses |  |  |  |  |  | 0.03 |  |  |  |  |  |  | — |  |
Adjusted net operating income per diluted share |  |  |  |  |  | $ | 1.21 |  | (1) |  |  |  |  |  | $ | 1.41 |  |
(1) Does not foot due to rounding. |  |  |  |  |  |  |  |  |  |  |  |  |

MGIC Investment Corporation - Q2 2023 | 42

Mortgage Insurance Portfolio
Mortgage originations
The total amount of mortgage originations is generally influenced by the level of home sales, interest rates, the percentage of homes purchased for cash, and the level of refinance activity. PMI market share of total mortgage originations is influenced by the mix of purchase and refinance originations. PMI market share is also impacted by the market share of total originations of the FHA, VA, USDA, and other alternatives to mortgage insurance, including GSE programs that may reduce or eliminate the demand for mortgage insurance.
NIW for the second quarter of 2023 was $12.4 billion (Q2 2022: $24.3 billion) and for the six months ended was $20.6 billion (YTD: $43.9 billion). We expect the decrease is reflective of a smaller origination market and our market position in the current year compared with the same period in the prior year. For the remainder of the year, we expect a smaller origination market to drive a decrease in our NIW compared to 2022.
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.
The following tables present characteristics of our primary NIW for the three and six months ended June 30, 2023 and 2022.

Primary NIW by FICO score |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(% of primary NIW) |  | 2023 |  | 2022 |  | 2023 |  | 2022
760 and greater |  | 51.0 | % |  | 41.2 | % |  | 48.5 | % |  | 42.1 | %
740 - 759 |  | 18.3 | % |  | 19.3 | % |  | 18.6 | % |  | 19.2 | %
720 - 739 |  | 12.7 | % |  | 15.3 | % |  | 13.5 | % |  | 14.9 | %
700 - 719 |  | 8.8 | % |  | 11.1 | % |  | 9.4 | % |  | 10.9 | %
680 - 699 |  | 5.0 | % |  | 7.5 | % |  | 5.4 | % |  | 7.4 | %
660 - 679 |  | 2.9 | % |  | 3.6 | % |  | 2.9 | % |  | 3.4 | %
640 - 659 |  | 0.8 | % |  | 1.2 | % |  | 1.2 | % |  | 1.3 | %
639 and less |  | 0.5 | % |  | 0.8 | % |  | 0.5 | % |  | 0.8 | %

Primary NIW by loan-to-value |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(% of primary NIW) |  | 2023 |  | 2022 |  | 2023 |  | 2022
95.01% and above |  | 11.4 | % |  | 14.3 | % |  | 11.8 | % |  | 13.0 | %
90.01% to 95.00% |  | 47.1 | % |  | 47.7 | % |  | 47.0 | % |  | 49.6 | %
85.01% to 90.00% |  | 30.4 | % |  | 27.7 | % |  | 30.0 | % |  | 27.2 | %
80.01% to 85.00% |  | 11.1 | % |  | 10.3 | % |  | 11.2 | % |  | 10.2 | %

Primary NIW by debt-to-income ratio |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(% of primary NIW) | 2023 |  | 2022 |  | 2023 |  | 2022
45.01% and above | 23.6 | % |  | 21.0 | % |  | 23.3 | % |  | 19.3 | %
38.01% to 45.00% | 31.2 | % |  | 32.1 | % |  | 32.1 | % |  | 31.9 | %
38.00% and below | 45.2 | % |  | 46.9 | % |  | 44.6 | % |  | 48.8 | %

Primary NIW by policy payment type |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(% of primary NIW) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Monthly premiums |  | 97.0 | % |  | 96.1 | % |  | 96.7 | % |  | 94.9 | %
Single premiums |  | 3.0 | % |  | 3.9 | % |  | 3.3 | % |  | 5.1 | %
Annual premiums |  | 0.0 | % |  | 0.0 | % |  | 0.0 | % |  | 0.0 | %
Primary NIW by type of mortgage |  |  |  |
| Three Months Ended June 30, |  | Six Months Ended June 30,
(% of primary NIW) | 2023 |  | 2022 |  | 2023 |  | 2022
Purchases | 98.2 | % |  | 98.2 | % |  | 98.0 | % |  | 96.4 | %
Refinances | 1.8 | % |  | 1.8 | % |  | 2.0 | % |  | 3.6 | %

MGIC Investment Corporation - Q2 2023 | 43

We consider a variety of loan characteristics when assessing the risk of a loan. The following tables provides information about loans with one or more of the following characteristics associated with our NIW: LTV ratios greater than 95%, mortgages with borrowers having FICO scores below 680, including those with borrowers having FICO scores of 620-679, and mortgages with borrowers having DTI ratios greater than 45%, each attribute as determined at the time of loan origination.

Primary NIW by number of attributes discussed above
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(% of primary NIW) |  | 2023 | 2022 |  | 2023 | 2022
One |  | 31.6 | % | 32.7 | % |  | 32.0 | % | 30.7 | %
Two or more |  | 3.7 | % | 4.0 | % |  | 3.8 | % | 3.5 | %

Insurance and risk in force
The amount of our IIF and RIF is impacted by the amount of NIW and cancellations of primary IIF during the period. Cancellation activity is primarily due to refinancing activity, but is also impacted by rescissions, cancellations due to claim payment, and policies cancelled when borrowers achieve the required amount of home equity. Refinancing activity has historically been affected by the level of mortgage interest rates and the level of home price appreciation. Cancellations generally move inversely to the change in the direction of interest rates, although they generally lag a change in direction.
Persistency
Our persistency was 83.5% at June 30, 2023 compared to 79.8% at December 31, 2022 and 71.5% at June 30, 2022. Since 2000, our year-end persistency ranged from a high of 84.7% at December 31, 2009 to a low of 47.1% at December 31, 2003. Our persistency rate is primarily affected by the level of current mortgage interest rates compared to the mortgage coupon rates on our IIF, which affects the vulnerability of the IIF to refinancing; and the current amount of equity that borrowers have in the homes underlying our IIF.

IIF and RIF |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In billions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
NIW |  | $ | 12.4 |  |  | $ | 24.3 |  |  | $ | 20.6 |  |  | $ | 43.9 |
Cancellations |  | (12.3) |  |  | (14.8) |  |  | (23.4) |  |  | (31.5) |
Increase (decrease) in primary IIF |  | $ | 0.1 |  |  | $ | 9.5 |  |  | $ | (2.8) |  |  | $ | 12.4 |
Direct primary IIF as of June 30, |  | $ | 292.5 |  |  | $ | 286.8 |  |  | $ | 292.5 |  |  | $ | 286.8 |
Direct primary RIF as of June 30, |  | $ | 76.4 |  |  | $ | 73.6 |  |  | $ | 76.4 |  |  | $ | 73.6 |

Credit profile of our primary RIF
Our 2009 and later books possess significantly improved risk characteristics when compared to our 2005-2008 books. Modification and refinance programs, such as HAMP and HARP, which expired at the end of 2016 and 2018, respectively, but have been replaced by other GSE modification programs, make outstanding loans more affordable to borrowers with the goal of reducing the number of foreclosures. As of June 30, 2023, loans associated with modification programs accounted for 3.9% of our total RIF, compared to 4.2% at December 31, 2022. Loans associated with 87.9% of all our modifications were current as of June 30, 2023.
MGIC Investment Corporation - Q2 2023 | 44

The following table sets forth certain statistics associated with our primary IIF and RIF as of June 30, 2023:

Primary insurance in force and risk in force by policy year
(in billions) | Insurance in Force (1) |  | Risk In Force (1) |  | Weighted Avg. Interest Rate |  | Delinquency Rate |  | Cede Rate % (2) |  | % of Original Remaining
Policy Year | Total | % of Total |  | Total | % of Total |  |  |  |
2004 and prior | $ | 1.4 |  | 0.5 | % |  | $ | 0.4 |  | 0.5 | % |  | 7.2 | % |  | 12.3 | % |  | — | % |  | NM
2005-2008 | 10.7 |  | 3.7 | % |  | 2.9 |  | 3.7 | % |  | 6.9 | % |  | 10.1 | % |  | — | % |  | 4.4 | %
2009-2015 | 5.3 |  | 1.8 | % |  | 1.4 |  | 1.9 | % |  | 4.3 | % |  | 4.5 | % |  | — | % |  | 3.0 | %
2016 | 5.4 |  | 1.8 | % |  | 1.4 |  | 1.9 | % |  | 3.9 | % |  | 2.9 | % |  | — | % |  | 11.2 | %
2017 | 7.1 |  | 2.4 | % |  | 1.9 |  | 2.4 | % |  | 4.3 | % |  | 3.4 | % |  | — | % |  | 14.4 | %
2018 | 7.3 |  | 2.5 | % |  | 1.9 |  | 2.5 | % |  | 4.8 | % |  | 4.0 | % |  | — | % |  | 14.7 | %
2019 | 15.7 |  | 5.4 | % |  | 4.1 |  | 5.4 | % |  | 4.1 | % |  | 1.9 | % |  | 1.6 | % |  | 24.2 | %
2020 | 57.5 |  | 19.6 | % |  | 14.7 |  | 19.2 | % |  | 3.2 | % |  | 0.9 | % |  | 29.2 | % |  | 50.3 | %
2021 | 94.1 |  | 32.2 | % |  | 24.5 |  | 32.1 | % |  | 3.1 | % |  | 1.0 | % |  | 29.4 | % |  | 79.8 | %
2022 | 68.8 |  | 23.5 | % |  | 18.2 |  | 23.9 | % |  | 4.9 | % |  | 0.8 | % |  | 30.4 | % |  | 92.7 | %
2023 | 19.2 |  | 6.6 | % |  | 5.0 |  | 6.5 | % |  | 6.2 | % |  | 0.1 | % |  | 26.9 | % |  | 98.2 | %
Total | $ | 292.5 |  |  |  | $ | 76.4 |  |  |  |  |  |  |  |  |  |

(1)May not foot due to rounding
(2)Cede Rate % is calculated as the risk in force ceded to our QSR transactions divided by the total risk in force.
Pool and other insurance
MGIC has written no new pool insurance since 2008; however, for a variety of reasons, including responding to capital market alternatives to PMI and customer demands, MGIC may write pool risk in the future. Our direct pool risk in force was $264 million ($189 million on pool policies with aggregate loss limits and $75 million on pool policies without aggregate loss limits) at June 30, 2023 compared to $276 million ($196 million on pool policies with aggregate loss limits and $80 million on pool policies without aggregate loss limits) at December 31, 2022. If claim payments associated with a specific pool reach the aggregate loss limit, the remaining IIF within the pool would be cancelled and any remaining delinquencies under the pool would be removed from our delinquency inventory.
In connection with the GSEs' CRT programs, an insurance subsidiary of MGIC provides insurance and reinsurance covering portions of the credit risk related to certain reference pools of mortgages acquired by the GSEs. Our RIF, as reported to us, related to these programs was approximately $307 million and $226 million as of June 30, 2023 and December 31, 2022, respectively.
MGIC Investment Corporation - Q2 2023 | 45

Consolidated Results of Operations
The following section of the MD&A provides a comparative discussion of MGIC Investment Corporation’s Consolidated Results of Operations for the three and six months ended June 30, 2023 and 2022.
Revenues

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(in millions) |  | 2023 |  | 2022 |  | % Change |  | 2023 |  | 2022 |  | % Change
Net premiums written |  | $ | 231.2 |  |  | $ | 244.3 |  |  | (5) |  |  | $ | 461.4 |  |  | $ | 487.0 |  |  | (5) |
Net premiums earned |  | $ | 242.8 |  |  | $ | 255.7 |  |  | (5) |  |  | $ | 484.8 |  |  | $ | 510.9 |  |  | (5) |
Investment income, net of expenses |  | 52.3 |  |  | 40.3 |  |  | 30 |  |  | 101.6 |  |  | 78.6 |  |  | 29 |
Net gains (losses) on investments and other financial instruments |  | (5.0) |  |  | (4.7) |  |  | 6 |  |  | (12.7) |  |  | (5.5) |  |  | 131 |
Other revenue |  | 0.5 |  |  | 1.9 |  |  | N/M |  | 0.9 |  |  | 3.7 |  |  | N/M
Total revenues (1) |  | $ | 290.7 |  |  | $ | 293.1 |  |  | (1) |  |  | $ | 574.6 |  |  | $ | 587.7 |  |  | (2) |
(1) May not foot due to rounding |  |  |  |  |  |  |  |  |  |  |  |

Net premiums written and earned
Comparative quarterly and year to date results
Premiums earned for the three and six months ended June 30, 2023 were $242.8 million and $484.8 million, respectively, compared with $255.7 million and $510.9 million, respectively, for the same periods last year. Net premiums written for three and six months ended June 30, 2023 were $231.2 million and $461.4 million, respectively, compared with $244.3 million and $487.0 million, respectively for the same comparable period last year.
The decrease in premiums written and earned for the three and six months ended June 30, 2023, compared with the prior year period is primarily due to an increase in ceded premiums that was the result of a decrease in the profit commission.
See “Overview - Factors Affecting Our Results” above for additional factors that influenced the amount of net premiums written and earned during the periods. See “Reinsurance Transactions” below for discussion of our ceded premiums written and earned.
Premium yields
Net premium yield is net premiums earned divided by average IIF during the period. The following table presents the key drivers of our net premium yield for each of the three and six months ended June 30, 2023 and June 30, 2022.

Premium Yield |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(in basis points) |  | 2023 | 2022 |  | 2023 | 2022
In force portfolio yield | (1) | 38.6 |  | 39.4 |  |  | 38.6 |  | 39.5 |
Premium refunds |  | (0.1) |  | 0.2 |  |  | (0.1) |  | — |
Accelerated earnings on single premium policies |  | 0.4 |  | 1.1 |  |  | 0.3 |  | 1.4 |
Total direct premium yield |  | 38.9 |  | 40.7 |  |  | 38.8 |  | 40.9 |
Ceded premiums earned, net of profit commission and assumed premiums | (2) | (5.7) |  | (4.5) |  |  | (5.8) |  | (4.5) |
Net premium yield |  | 33.2 |  | 36.2 |  |  | 33.0 |  | 36.4 |

(1) Total direct premiums earned, excluding premium refunds and accelerated premiums from single premium policy cancellations divided by average primary insurance in force.
(2) Assumed premiums include those from our participation in GSE CRT programs, of which the impact on the net premium yield was 0.4 bps for the six months ended June 30, 2023 compared to 0.3 bps for the six months ended June 30, 2022.
Changes in the net premium yield for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 reflect the following:

In force Portfolio Yield
è | A larger percentage of our IIF from book years with lower premium rates due to a decline in premium rates in recent years resulting from pricing competition, an in force book with lower risk characteristics, lower required capital, the availability of reinsurance, and certain policies undergoing premium rate resets on their ten-year anniversaries.

MGIC Investment Corporation - Q2 2023 | 46

Premium Refunds
è | Premium refunds are primarily driven by claim activity and our estimate of refundable premiums on our delinquency inventory. The low level of claims received have resulted in a lower level of premium refunds. Our estimate of refundable premium on our delinquency inventory fluctuates with changes in our delinquency inventory and our estimate of the number of loans in our delinquency inventory that will result in a claim.
Accelerated earnings on single premium policies
è | The lower level of refinance transactions have reduced the benefit from accelerated earned premium from cancellation of single premium policies prior to their estimated policy life.
Ceded premiums earned, net of profit commission and assumed premiums
è | Ceded premiums earned, net of profit commission adversely impact our net premium yield. Ceded premiums earned, net of profit commission, are associated with the QSR Transactions and the XOL Transactions. Assumed premiums consists primarily of premiums from GSE CRT programs. See “Reinsurance Transactions“ below for further discussion on our reinsurance transactions.

As discussed 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,” the private mortgage insurance industry is highly competitive and premium rates have declined over the past several years. With the smaller origination market, higher persistency rate, and continued high credit quality for NIW expected in 2023, we expect our in force portfolio premium yield to remain relatively flat during 2023.
Reinsurance Transactions
Quota share reinsurance
Our quota share reinsurance affects various lines of our statements of operations and therefore we believe it should be analyzed by reviewing its total effect on our pre-tax income, described as follows.

è |  | We cede a fixed percentage of premiums on insurance covered by the agreements.
è |  | We receive the benefit of a profit commission through a reduction in the premiums we cede. The profit commission varies inversely with the level of losses incurred on a “dollar for dollar” basis and can be eliminated at loss levels higher than what we are currently experiencing. As a result, lower levels of ceded losses incurred result in less benefit from ceded losses incurred and a higher profit commission; higher levels of ceded losses incurred result in more benefit from ceded losses incurred and a lower profit commission (or for certain levels of accident year loss ratios, its elimination).
è |  | We receive the benefit of a ceding commission through a reduction in underwriting expenses equal to 20% of premiums ceded (before the effect of the profit commission).
è |  | We cede a fixed percentage of losses incurred on insurance covered by the agreements.

The following table provides information related to our QSR Transactions for each of the three and six months ended June 30, 2023 and June 30, 2022.

Quota Share Reinsurance
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Ceded premiums written and earned, net of profit commission |  | $27,442 |  | $14,995 |  | $57,319 |  | $37,373
% of direct premiums written |  | 10% |  | 5% |  | 10% |  | 7%
% of direct premiums earned |  | 10% |  | 5% |  | 10% |  | 6%
Profit commission |  | $34,809 |  | $48,814 |  | $66,520 |  | $87,794
Ceding commissions |  | $12,450 |  | $12,762 |  | $24,768 |  | $25,034
Ceded losses incurred |  | $1,954 |  | $(10,430) |  | $6,635 |  | $(12,415)
Mortgage insurance portfolio: |  |  |  |  |  |  |  |
Ceded RIF (Dollars in millions) |  |  |  |  |  |  |  |
2015 QSR |  |  |  |  |  | $— |  | $694
2019 QSR |  |  |  |  |  | — |  | 1,302
2020 QSR |  |  |  |  |  | 3,605 |  | 4,311
2021 QSR |  |  |  |  |  | 6,462 |  | 7,101
2022 QSR |  |  |  |  |  | 4,853 |  | 3,019
2023 QSR |  |  |  |  |  | 1,093 |  | —
Credit Union QSR |  |  |  |  |  | 2,446 |  | 1,941
Total ceded RIF |  |  |  |  |  | $18,459 |  | $18,368

Ceded premiums written, and earned net of profit commission increased in the three and six months ended June 30, 2023 when compared with the prior year primarily due to a decrease in the profit commission, which increases ceded premiums written and earned. The decrease in profit commission was driven by the increase in losses incurred.
MGIC Investment Corporation - Q2 2023 | 47

We terminated our 2015 and 2019 QSR Transactions effective December 31, 2022.
Covered risk
The percentages of our NIW, new risk written, IIF, and RIF subject to our QSR Transactions as shown in the following table will vary from period to period in part due to the mix of our risk written during the period and the number of active QSR Transactions.

Quota Share Reinsurance
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
NIW subject to QSR Transactions |  | 87.5 | % |  | 87.7 | % |  | 87.0 | % |  | 87.6 | %
New Risk Written subject to QSR Transactions |  | 93.1 | % |  | 93.3 | % |  | 92.9 | % |  | 93.2 | %
IIF subject to QSR Transactions |  | 70.9 | % |  | 75.5 | % |  | 70.9 | % |  | 75.5 | %
RIF subject to QSR Transactions |  | 75.6 | % |  | 81.4 | % |  | 75.6 | % |  | 81.4 | %

The decrease in IIF and RIF subject to quota share reinsurance for the three and six months ended June 30, 2023, compared to June 30, 2022, is primarily due to the termination of our 2015 and 2019 QSR Transactions at December 31, 2022.
As of June 30, 2023, the weighted average coverage percentage of our QSR transactions was 32% based on RIF.
Excess of loss reinsurance
We have Excess-of-loss transactions (“XOL Transactions”) with panels of unaffiliated reinsurers executed through the traditional reinsurance market (“Traditional XOL Transaction”) and with unaffiliated special purpose insurers (“Home Re Transactions”).
We have Traditional XOL Transactions with panels of third-party reinsurers. For the covered policies, 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. The 2022 Traditional XOL Transaction provides $142.6 million of reinsurance coverage on eligible NIW in 2022. The 2023 Traditional XOL Transaction provides up to $116.0 million of reinsurance coverage on eligible NIW in 2023.
The Home Re Transactions are executed with unaffiliated special purpose entities (“Home Re Entities”) through the issuance of insurance linked notes (“ILNs”). As of June 30, 2023 our Home Re Transactions provided $1.4 billion of loss coverage on a portfolio of policies having an in force date from July 1, 2016 through March 31, 2019, and from January 1, 2020 through December 31, 2021; all dates inclusive. For this reinsurance coverage, 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 amount.
As of June 30, 2023 the premiums under most of our Home Re Transactions from 2018 through 2021 reference the one-month LIBOR rate. The ICE Benchmark Administration, the administrator of LIBOR, ceased publishing all USD LIBOR tenors on June 30, 2023. These Home Re Transactions transitioned to SOFR when the one-month LIBOR rate was no longer published.
The current attachment, current detachment, and PMIERs required asset credit for each of our XOL Transactions, excluding the 2023 Traditional XOL which is still in its fill up period, as of June 30, 2023, are as follows.

($ In thousands) |  | Initial Attachment % (1) | Initial Detachment % (2) | Current Attachment % (1) | Current Detachment % (2) | PMIERs Required Asset Credit
Home Re 2018-1 |  | 2.25% | 6.50% | 13.34% | 21.64% | $ | — |
Home Re 2019-1 |  | 2.50% | 6.75% | 16.30% | 34.81% | — |
Home Re 2020-1 |  | 3.00% | 7.50% | 6.94% | 8.76% | — |
Home Re 2021-1 |  | 2.25% | 6.50% | 3.63% | 7.58% | 140,992 |
Home Re 2021-2 |  | 2.10% | 6.50% | 2.84% | 7.31% | 223,437 |
Home Re 2022-1 |  | 2.75% | 6.75% | 3.08% | 7.56% | 435,384 |
2022 Traditional XOL |  | 2.60% | 7.10% | 2.70% | 7.36% | 137,493 |

(1) The percentage represents the cumulative losses as a percentage of adjusted risk in force that MGIC retains prior to the XOL taking losses.
(2) The percentage represents the cumulative losses as a percentage of adjusted risk in force that must be reached before MGIC begins absorbing losses after the XOL layer.
Ceded premiums on our XOL Transactions were $17.4 million and $34.4 million, respectively, for the three and six months ended June 30, 2023, and $19.3 million and $31.1 million, respectively, for the three and six months ended June 30, 2022.
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See Note 4 - “Reinsurance" to our consolidated financial statements for additional discussion of our QSR and XOL Transactions.
Investment income
Comparative quarterly and year to date results
Net investment income in the three and six months ended June 30, 2023 was $52.3 million and $101.6 million, respectively, compared with $40.3 million and $78.6 million, in comparison to the corresponding periods in the prior year. The increase in net investment income was primarily due to an increase of 80 basis points in the average investment yields.
Losses and expenses

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) |  | 2023 |  | 2022 |  | % Change |  | 2023 |  | 2022 |  | % Change
Losses incurred, net |  | $ | (17.7) |  |  | $ | (99.1) |  |  | 82 |  |  | $ | (11.2) |  |  | $ | (118.4) |  |  | (91) |
Amortization of deferred policy acquisition costs |  | 2.6 |  |  | 3.0 |  |  | (13) |  |  | 5.1 |  |  | 5.7 |  |  | (11) |
Other underwriting and operating expenses, net |  | 54.0 |  |  | 53.4 |  |  | 1 |  |  | 124.1 |  |  | 108.2 |  |  | 15 |
Loss on debt extinguishment |  | — |  |  | 6.4 |  |  | N/M |  | — |  |  | 28.5 |  |  | N/M
Interest expense |  | 9.4 |  |  | 13.5 |  |  | (30) |  |  | 18.8 |  |  | 28.4 |  |  | (34) |
Total losses and expenses |  | $ | 48.3 |  |  | $ | (22.8) |  |  | (312) |  |  | $ | 136.7 |  |  | $ | 52.4 |  |  | 161 |

Losses incurred, net
As discussed in “Critical Accounting Estimates” in our 2022 10-K MD&A, we establish case loss reserves for future claims on delinquent loans that were reported to us as two payments past due and have not become current or resulted in a claim payment. Such loans are referred to as being in our delinquency inventory. Case loss reserves are established based on estimating the number of loans in our delinquency inventory that will result in a claim payment, which is referred to as the claim rate, and further estimating the amount of the claim payment, which is referred to as claim severity.
IBNR reserves are established for estimated losses from delinquencies we estimate have occurred prior to the close of an accounting period but have not yet been reported to us. IBNR reserves are also established using estimated claim rates and claim severities.
Estimation of losses is inherently judgmental. Even in a stable environment, changes to our estimates could result in a material impact to our consolidated results of operations and financial position. The conditions that affect the claim rate and claim severity include the current and future state of the domestic economy, including unemployment and the current and future strength of local housing markets; exposure on insured loans; the amount of time between delinquency and claim filing (all else being equal, the longer the period between delinquency and claim filing, the greater the severity); and curtailments and rescissions. The actual amount of the claim payments may be substantially different than our loss reserve estimates. Our estimates could be adversely affected by several factors, including a deterioration of regional or national economic conditions, including unemployment, leading to a reduction in borrowers’ income and thus their ability to make mortgage payments, the impact of past and future government initiatives and actions taken by the GSEs (including mortgage forbearance programs and foreclosure moratoriums), and a drop in housing values which may affect borrower willingness to continue to make mortgage payments when the value of the home is below the mortgage balance. Loss reserves in future periods will also be dependent on the number of loans reported to us as delinquent.
Prior to the COVID-19 pandemic, losses incurred have followed a seasonal trend in which the second half of the year has weaker credit performance than the first half, with higher new notice activity and a lower cure rate. The state of the economy, local housing markets and various other factors may result in delinquencies not following the typical pattern.
For information on how pandemics and other natural disasters could affect losses incurred, net see our Risk Factors 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". As discussed in our Risk Factor 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” if we have not received a notice of delinquency with respect to a loan and if we have not estimated the loan to be delinquent as of June 30, 2023 through our IBNR reserve, then we have not yet recorded an incurred loss with respect to that loan.
Our estimates are also affected by any agreements we enter into regarding our claims paying practices.
MGIC Investment Corporation - Q2 2023 | 49

Comparative quarterly results
Losses incurred, net for the second quarter of 2023 were $(17.7) million, an increase of $81.4 million compared to the second quarter of 2022 losses incurred, net of $(99.1) million. While new delinquency notices added approximately $42.2 million for the three months ended June 30, 2023, our re-estimation of loss reserves on previously received delinquency notices resulted in favorable development of approximately $59.9 million. For the three months ended June 30, 2022, new delinquency notices added approximately $31.8 million, offset by our re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of approximately $130.9 million. 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.
Comparative year to date results
Losses incurred, net for the six months ended June 30, 2023 were $(11.2) million, an increase of $107.2 million compared with losses incurred of $(118.4) million. While new delinquency notices added approximately $89.5 million for the six months ended June 30, 2023, our re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of approximately $100.7 million. For the six months ended June 30, 2022, new delinquency notices added approximately $68.2 million, offset by our re-estimation of loss reserves on previously received delinquency notices resulting in favorable development of approximately $186.6 million. 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.

Composition of losses incurred
| Three Months Ended June 30, | Six Months Ended June 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Current year / New notices | $42.2 |  | $31.8 |  | $89.5 |  | $68.2
Prior year reserve development | (59.9) |  | (130.9) |  | (100.7) |  | (186.6)
Losses incurred, net | $(17.7) |  | $(99.1) |  | $(11.2) |  | $(118.4)

Loss ratio
The loss ratio is the ratio, expressed as a percentage, of the sum of incurred losses and loss adjustment expenses to net premiums earned. The loss ratio was (7.3)% and (2.3)% for the three and six months ended June 30, 2023, compared with (38.7%) and (23.2%), respectively, for the corresponding periods in the prior year. The increase in the loss ratio for the three and six months ended June 30, 2023 compared to the respective prior year period was primarily due to the increase in losses incurred discussed above.
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New notice claim rate
The table below presents our new delinquency notices received, delinquency inventory, and the average number of missed payments for the loans in our delinquency inventory by policy year:

New notices and delinquency inventory during the three and six months ended and as of:
June 30, 2023
Policy Year | New Notices for the Three Months Ended | New Notices for the Six Months Ended | Delinquency Inventory | Avg. Number of Missed Payments of Delinquency Inventory
2004 and prior | 817 |  | 1,660 |  | 2,166 |  | 19
2005-2008 | 2,569 |  | 5,269 |  | 7,209 |  | 19
2009-2015 | 678 |  | 1,378 |  | 1,620 |  | 12
2016 | 403 |  | 895 |  | 955 |  | 10
2017 | 568 |  | 1,196 |  | 1,390 |  | 10
2018 | 714 |  | 1,500 |  | 1,717 |  | 9
2019 | 677 |  | 1,464 |  | 1,515 |  | 9
2020 | 1,085 |  | 2,352 |  | 2,137 |  | 7
2021 | 1,948 |  | 4,004 |  | 3,474 |  | 6
2022 | 1,079 |  | 2,117 |  | 1,614 |  | 4
2023 | 42 |  | 42 |  | 26 |  | 2
Total | 10,580 |  | 21,877 |  | 23,823 |  | 12
Claim rate on new notices (1) | 8 | % |  |  |
June 30, 2022
Policy Year | New Notices for the Three Months Ended | New Notices for the Six Months Ended | Delinquency Inventory | Avg. Number of Missed Payments of Delinquency Inventory
2004 and prior | 832 |  | 1,834 |  | 2,526 |  | 20
2005-2008 | 2,728 |  | 5,855 |  | 9,158 |  | 20
2009-2015 | 690 |  | 1,550 |  | 2,391 |  | 13
2016 | 475 |  | 1,030 |  | 1,450 |  | 12
2017 | 637 |  | 1,356 |  | 1,966 |  | 12
2018 | 738 |  | 1,553 |  | 2,314 |  | 11
2019 | 682 |  | 1,544 |  | 2,146 |  | 11
2020 | 1,113 |  | 2,428 |  | 2,643 |  | 8
2021 | 1,364 |  | 2,812 |  | 2,156 |  | 5
2022 | 137 |  | 137 |  | 105 |  | 2
Total | 9,396 |  | 20,099 |  | 26,855 |  | 14
Claim rate on new notices (1) | 8 | % |  |  |
(1) Claim rate is the respective quarter to date weighted average rate and is rounded to the nearest whole percent.

Claims severity
Factors that impact claim severity include:

è |  | economic conditions at time of claim filing, including home prices compared to home prices at the time of placement of coverage,
è |  | exposure of the loan, which is the unpaid principal balance of the loan times our insurance coverage percentage,
è |  | length of time between delinquency and claim filing (which impacts the amount of interest and expenses, with a longer time between default and claim filing generally increasing severity), and
è |  | curtailments.

As discussed in Note 11 - “Loss Reserves,” our loss reserves estimates take into consideration trends over time, because the development of the delinquencies may vary from period to period without establishing a meaningful trend. An increase in third party property sales prior to claim settlement has resulted in a decrease in the average claim paid and the average claim paid as a percentage of exposure in recent years. At the start of the COVID-19 pandemic, the level of claims received decreased. Claim activity and the average claims paid as a percentage of exposure has not yet returned to pre-COVID-19 levels. The magnitude and timing of the increases are uncertain.
The majority of loans insured prior to 2009 (which represent 39% 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 that an insured can include interest when filing a claim.
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Under our current master policy terms, an insured can include accumulated interest when filing a claim only for the first three years the loan is delinquent. In each case, the insured must comply with its obligations under the terms of the applicable master policy.

Claims severity trend for claims paid during the period
Period |  | Average exposure on claim paid |  | Average claim paid |  | % Paid to exposure |  | Average number of missed payments at claim received date
Q2 2023 |  | 40,013 |  |  | 29,803 |  |  | 74.5 | % |  | 43 |
Q1 2023 |  | 37,412 |  |  | 28,227 |  |  | 75.4 | % |  | 42 |
Q4 2022 |  | 38,903 |  |  | 28,492 |  |  | 73.2 | % |  | 41 |
Q3 2022 |  | 37,625 |  |  | 23,461 |  |  | 62.4 | % |  | 46 |
Q2 2022 |  | 44,106 |  |  | 27,374 |  |  | 62.1 | % |  | 41 |
Q1 2022 |  | 38,009 |  |  | 27,662 |  |  | 72.8 | % |  | 45 |
Note: Table excludes material settlements. Settlements include amounts paid in settlement disputes for claims paying practices and/or commutations of policies.

The length of time a loan is in the delinquency inventory (see Note 11 - “Loss Reserves,” table 11.4) can differ from the number of payments that the borrower has not made or is considered delinquent. These differences typically result from a borrower making monthly payments that do not result in the loan becoming fully current. Generally, a defaulted loan with more missed payments is more likely to result in a claim. The number of payments that a borrower is delinquent is shown in the following table.

Delinquency inventory - number of payments delinquent
|  | June 30, 2023 |  | December 31, 2022 |  | June 30, 2022
3 payments or less |  | 10,694 |  |  | 11,484 |  |  | 9,198 |
4-11 payments |  | 7,437 |  |  | 8,026 |  |  | 8,138 |
12 payments or more (1) |  | 5,692 |  |  | 6,877 |  |  | 9,519 |
Total |  | 23,823 |  |  | 26,387 |  |  | 26,855 |
3 payments or less |  | 45 | % |  | 44 | % |  | 35 | %
4-11 payments |  | 31 | % |  | 30 | % |  | 30 | %
12 payments or more |  | 24 | % |  | 26 | % |  | 35 | %
Total |  | 100 | % |  | 100 | % |  | 100 | %

(1)Approximately 34%, 28%, and 21% of the primary delinquency inventory with 12 payments or more delinquent has at least 36 payments delinquent as of June 30, 2023, December 31, 2022, and June 30, 2022, respectively.
Net losses and LAE paid
Net losses and LAE paid in the three and six months ended June 30, 2023 were consistent with the same period in the prior year. 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. 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.
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The following table presents our net losses and LAE paid for the three and six months ended June 30, 2023 and 2022.

Net losses and LAE paid |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Total primary (excluding settlements) |  | $ | 10 |  |  | $ | 9 |  |  | $ | 19 |  |  | $ | 18 |
Claims paying practices and NPL settlements |  | — |  |  | 4 |  |  | — |  |  | 4 |
Direct losses paid |  | 10 |  |  | 13 |  |  | 19 |  |  | 22 |
Reinsurance |  | — |  |  | (1) |  |  | — |  |  | (1) |
Net losses paid |  | 10 |  |  | 12 |  |  | 19 |  |  | 21 |
LAE |  | 2 |  |  | 2 |  |  | 3 |  |  | 4 |
Net losses and LAE paid |  | $ | 12 |  |  | $ | 14 |  |  | $ | 22 |  |  | $ | 25 |
Average Claim Paid |  | $ | 29,803 |  |  | $ | 27,374 |  |  | $ | 29,059 |  |  | $ | 27,519 |

The primary average claim paid can vary materially from period to period based upon a variety of factors, including the local market conditions, average loan amount, average coverage percentage, the amount of time between delinquency and claim filing, and our loss mitigation efforts on loans for which claims are paid.
The primary average RIF on delinquent loans at June 30, 2023, December 31, 2022 and June 30, 2022 for the top 5 jurisdictions (based on the June 30, 2023 delinquency inventory) appears in the following table.

Primary average RIF - delinquent loans
|  | June 30, 2023 |  | December 31, 2022 |  | June 30, 2022
Florida | $ | 60,930 |  |  | $ | 59,515 |  |  | $ | 56,308 |
Texas | 56,151 |  |  | 53,364 |  |  | 50,900 |
Illinois | 42,163 |  |  | 41,640 |  |  | 41,193 |
Pennsylvania | 42,371 |  |  | 40,993 |  |  | 39,408 |
New York | 75,897 |  |  | 74,760 |  |  | 74,784 |
All other jurisdictions | 54,079 |  |  | 51,693 |  |  | 50,603 |
All jurisdictions | $ | 54,591 |  |  | $ | 52,511 |  |  | $ | 51,197 |

The primary average RIF on all loans was $66,099, $64,784, and $62,735 at June 30, 2023, December 31, 2022, and June 30, 2022, respectively.
Loss reserves
The gross reserves at June 30, 2023, December 31, 2022, and June 30, 2022 appear in the table below.

Gross reserves
|  | June 30, 2023 | December 31, 2022 | June 30, 2022
Primary: |  |  |  |  |  |  |
Direct case loss reserves (in millions) |  | $ | 472 |  |  | $ | 498 |  |  | $ | 656 |  |
Direct IBNR and LAE reserves |  | 55 |  |  | 56 |  |  | 66 |  |
Total primary direct loss reserves |  | $ | 527 |  |  | $ | 554 |  |  | $ | 722 |  |
Ending delinquent inventory |  |  | 23,823 |  |  | 26,387 |  |  | 26,855 |
Percentage of loans delinquent (delinquency rate) |  |  | 2.05 | % |  | 2.22 | % |  | 2.28 | %
Average total primary loss reserves per delinquency |  |  | $ | 22,123 |  |  | $ | 20,994 |  |  | $ | 26,890 |
Primary claims received inventory included in ending delinquent inventory |  |  | 291 |  |  | 267 |  |  | 254 |
Other gross reserves (1) (in millions) |  | $ | 4 |  |  | $ | 4 |  |  | $ | 5 |  |

(1)Other Gross Reserves includes direct and assumed reserves that are not included within our primary loss reserves.
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The primary delinquency inventory for the top 15 jurisdictions (based on June 30, 2023 delinquency inventory) at June 30, 2023, December 31, 2022 and June 30, 2022 appears in the following table.

Primary delinquency inventory by jurisdiction
|  |  |  |  |  | June 30, 2023 |  | December 31, 2022 |  | June 30, 2022
Florida * |  |  |  |  |  | 1,940 |  |  | 2,414 |  |  | 2,155 |
Texas |  |  |  |  |  | 1,808 |  |  | 1,935 |  |  | 2,004 |
Illinois * |  |  |  |  |  | 1,483 |  |  | 1,640 |  |  | 1,756 |
Pennsylvania * |  |  |  |  |  | 1,386 |  |  | 1,525 |  |  | 1,488 |
New York * |  |  |  |  |  | 1,332 |  |  | 1,399 |  |  | 1,499 |
California |  |  |  |  |  | 1,267 |  |  | 1,336 |  |  | 1,370 |
Ohio * |  |  |  |  |  | 1,171 |  |  | 1,322 |  |  | 1,201 |
Michigan |  |  |  |  |  | 990 |  |  | 965 |  |  | 932 |
Georgia |  |  |  |  |  | 896 |  |  | 954 |  |  | 983 |
New Jersey * |  |  |  |  |  | 736 |  |  | 841 |  |  | 916 |
Maryland |  |  |  |  |  | 672 |  |  | 719 |  |  | 782 |
North Carolina |  |  |  |  |  | 610 |  |  | 753 |  |  | 788 |
Indiana |  |  |  |  |  | 599 |  |  | 622 |  |  | 612 |
Minnesota |  |  |  |  |  | 530 |  |  | 573 |  |  | 600 |
Wisconsin |  |  |  |  |  | 499 |  |  | 542 |  |  | 570 |
All other jurisdictions |  |  |  |  |  | 7,904 |  |  | 8,847 |  |  | 9,199 |
Total |  |  |  |  |  | 23,823 |  |  | 26,387 |  |  | 26,855 |

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 primary delinquency inventory by policy year at June 30, 2023, December 31, 2022 and June 30, 2022 appears in the following table.

Primary delinquency inventory by policy year
| June 30, 2023 |  | December 31, 2022 |  | June 30, 2022
Policy year: |  |  |  |  |
2004 and prior | 2,166 |  |  | 2,471 |  |  | 2,526 |
2004 and prior % | 9 | % |  | 9 | % |  | 9 | %
2005 | 1,257 |  |  | 1,438 |  |  | 1,512 |
2006 | 2,117 |  |  | 2,388 |  |  | 2,504 |
2007 | 3,125 |  |  | 3,680 |  |  | 4,140 |
2008 | 710 |  |  | 811 |  |  | 1,002 |
2005 - 2008 % | 30 | % |  | 32 | % |  | 34 | %
2009 | 54 |  |  | 51 |  |  | 65 |
2010 | 32 |  |  | 31 |  |  | 47 |
2011 | 23 |  |  | 43 |  |  | 58 |
2012 | 65 |  |  | 72 |  |  | 89 |
2013 | 180 |  |  | 243 |  |  | 323 |
2014 | 498 |  |  | 633 |  |  | 751 |
2015 | 768 |  |  | 944 |  |  | 1,058 |
2009 - 2015 % | 7 | % |  | 8 | % |  | 9 | %
2016 | 955 |  |  | 1,249 |  |  | 1,450 |
2017 | 1,390 |  |  | 1,719 |  |  | 1,966 |
2018 | 1,717 |  |  | 2,060 |  |  | 2,314 |
2019 | 1,515 |  |  | 1,823 |  |  | 2,146 |
2020 | 2,137 |  |  | 2,558 |  |  | 2,643 |
2021 | 3,474 |  |  | 3,307 |  |  | 2,156 |
2022 | 1,614 |  |  | 866 |  |  | 105 |
2023 | 26 |  |  | — |  |  | — |
2016 and later % | 54 | % |  | 51 | % |  | 48 | %
Total | 23,823 |  |  | 26,387 |  |  | 26,855 |

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On our primary business, the highest claim frequency years have typically been the third and fourth year after loan origination. However, the pattern of claim frequency can be affected by many factors, including persistency and deteriorating economic conditions. Deteriorating economic conditions can result in increasing claims following a period of declining claims. As of June 30, 2023, 63% of our primary RIF was written subsequent to December 31, 2020, 82% of our primary RIF was written subsequent to December 31, 2019, and 87% of our primary RIF was written subsequent to December 31, 2018.
Underwriting and other expenses, net
Underwriting and other expenses includes items such as employee compensation costs, fees for professional and consulting services, depreciation and maintenance expense, and premium taxes, and are reported net of ceding commissions.
Underwriting and other expenses, net for the three and six months ended June 30, 2023, were $54.0 million and $124.1 million, respectively, compared with $53.4 million and $108.2 million, for the corresponding periods in the prior year. Underwriting and other expenses, net increased during the six months ended June 30, 2023 compared with the same period in the prior year primarily due to an increase in pension expenses as a result of settlement accounting charges, an increase in performance based employee compensation, and an increase in postretirement benefit expenses, offset partially by a decrease in expenses related to professional and consulting services. We will incur additional settlement accounting charges during the remainder of 2023; however, the magnitude and timing is uncertain.

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Underwriting expense ratio |  | 24.1 | % |  | 22.4 | % |  | 27.6 | % |  | 22.7 | %

The underwriting expense ratio is the ratio, expressed as a percentage, of the underwriting and operating expenses, net and amortization of DAC of our combined insurance operations (which excludes underwriting and operating expenses of our non-insurance subsidiaries) to net premiums written. The underwriting expense ratio for the three months ended June 30, 2023, increased compared with the same period in the prior year primarily due to a decrease in net premiums written. The underwriting expense ratio for the six months ended June 30, 2023 increased compared with the same period in the prior year primarily due to an increase in underwriting expenses and a decrease in net premiums written.
Loss on debt extinguishment
We have not repurchased any of our outstanding debt obligations in 2023. For the six months ended June 30, 2022, we recorded a loss on debt extinguishment of $27.2 million, related to the repurchase of a portion our 9% Debenture, at costs in excess of their carrying value and a prepayment fee of $1.3 million on the outstanding principal balance of the FHLB Advance.
Provision for income taxes and effective tax rate

Income tax provision and effective tax rate |  |  |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions, except rate) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Income before tax |  | $ | 242.4 |  |  | $ | 315.9 |  |  | $ | 438.0 |  |  | $ | 535.3 |
Provision for income taxes |  | $ | 51.3 |  |  | $ | 66.6 |  |  | $ | 92.4 |  |  | $ | 111.0 |
Effective tax rate |  | 21.2 | % |  | 21.1 | % |  | 21.1 | % |  | 20.7 | %

Our effective tax rate for the three and six months ended June 30, 2023 and 2022 approximated the statutory tax rate of 21%.
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Balance Sheet Review
The following sections mainly focus on the major developments on our Consolidated Balance Sheet since December 31, 2022.
Consolidated balance sheets - Assets

(in thousands) | June 30, 2023 |  | December 31, 2022 |  | % Change
Investments | $ | 5,618,272 |  |  | $ | 5,424,688 |  |  | 4 |
Cash and cash equivalents | 310,720 |  |  | 327,384 |  |  | (5) |
Premiums receivable | 57,066 |  |  | 58,000 |  |  | (2) |
Reinsurance recoverable on loss reserves | 34,475 |  |  | 28,240 |  |  | 22 |
Reinsurance recoverable on paid losses | 240 |  |  | 18,081 |  |  | (99) |
Deferred incomes taxes, net | 110,782 |  |  | 124,769 |  |  | (11) |
Other assets | 221,892 |  |  | 232,631 |  |  | (5) |
Total Assets | $ | 6,353,447 |  |  | $ | 6,213,793 |  |  | 2 |

Investments - Our investments increased to $5.6 billion as of June 30, 2023 from $5.4 billion as of December 31, 2022. The increase is primarily due to net investment purchases and an improvement in the unrealized loss on our investment portfolio in 2023.
The average duration and investment yield of our investment portfolio as of June 30, 2023 and December 31, 2022 are shown in the table below.

Portfolio duration and embedded investment yield
|  | June 30, 2023 |  | December 31, 2022
Duration (in years) |  | 4.2 |  | 4.3
Pre-tax yield (1) |  | 3.4% |  | 3.0%
After-tax yield (1) |  | 2.8% |  | 2.5%

(1)Embedded investment yield is calculated on a yield-to-worst basis.
The security ratings of our fixed income investments as of June 30, 2023 and December 31, 2022 are shown in the following table.

Fixed income security ratings
| Security Ratings (1)
Period | AAA | AA | A | BBB
June 30, 2023 | 21% | 25% | 35% | 19%
December 31, 2022 | 18% | 28% | 34% | 20%

(1)Ratings are provided by one or more of: Moody's, Standard & Poor's and Fitch Ratings. If three ratings are available, the middle rating is used; if two FICO scores are available, the lower of the two is used; if only one FICO score is available, it is used.
Cash and cash equivalents - Our cash and cash equivalents balance decreased to $310.7 million as of June 30, 2023, from $327.4 million as of December 31, 2022, as net cash generated from operating activities was offset by cash used in investing and financing activities.
Reinsurance recoverable on paid losses - Reinsurance recoverable on paid losses decreased to $0.2 million at June 30, 2023, from $18.1 million at December 31, 2022. At December 31, 2022 the reinsurance recoverable on paid losses is primarily composed of losses recoverable from reinsurers at the time of termination of the 2015 and 2019 QSR Transactions. In a reinsurance termination, amounts for any incurred but unpaid losses are due to us from the reinsurers.
Income Taxes - Our current income tax liability was $2.6 million at June 30, 2023 and is included as a component of other liabilities in our consolidated balance sheets. Our current income tax receivable was $5.3 million at December 31, 2022 and is included as a component of other assets in our consolidated balance sheets. Our deferred tax asset was $110.8 million and $124.8 million at June 30, 2023 and December 31, 2022, respectively. The change in our deferred income tax asset was primarily due to the tax effect of unrealized gains generated by the investment portfolio during the first six months of 2023. We owned $744.2 million and $661.7 million of tax and loss bonds at June 30, 2023 and December 31, 2022, respectively.
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Consolidated balance sheets - Liabilities and equity

(in thousands) | June 30, 2023 |  | December 31, 2022 |  | % Change
Loss reserves | $ | 530,681 |  |  | $ | 557,988 |  |  | (5) |
Unearned premiums | 171,879 |  |  | 195,289 |  |  | (12) |
Long-term debt | 663,546 |  |  | 662,810 |  |  | — |
Other liabilities | 143,079 |  |  | 154,966 |  |  | (8) |
Total Liabilities | $ | 1,509,185 |  |  | $ | 1,571,053 |  |  | (4) |
Common stock | 371,353 |  |  | 371,353 |  |  | — |
Paid-in capital | 1,799,444 |  |  | 1,798,842 |  |  | — |
Treasury stock | (1,192,783) |  |  | (1,050,238) |  |  | 14 |
Accumulated other comprehensive income (loss), net of tax | (424,887) |  |  | (481,511) |  |  | 12 |
Retained earnings | 4,291,135 |  |  | 4,004,294 |  |  | 7 |
Shareholders’ equity | $ | 4,844,262 |  |  | $ | 4,642,740 |  |  | 4 |

Loss reserves and Reinsurance recoverable on loss reserves - Our loss reserves include estimates of losses and settlement expenses on (1) loans in our delinquency inventory (known as case reserves), (2) IBNR delinquencies, and (3) LAE. Our gross reserves are reduced by reinsurance recoverable on loss reserves to calculate a net reserve balance. Loss reserves decreased to $530.7 million as of June 30, 2023, from $558.0 million as of December 31, 2022. The decrease in loss reserves is primarily from favorable development of $100.7 million on previously received delinquency notices, partially offset by loss reserves established on new notices. Reinsurance recoverables on loss reserves were $34.5 million and $28.2 million as of June 30, 2023 and December 31, 2022, respectively.
Unearned premiums - Our unearned premium decreased to $171.9 million as of June 30, 2023 from $195.3 million as of December 31, 2022 primarily due to the run-off of our existing portfolio of single premium policies outpacing the level of NIW from single premium policies.
Shareholder’s equity - The increase in shareholders’ equity represents an improvement in the unrealized loss on our investment portfolio and net income, partially offset by repurchases of our common stock and dividends paid in the first six months of 2023.
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Liquidity and Capital Resources
Consolidated Cash Flow Analysis
We have three primary types of cash flows: (1) operating cash flows, which consist mainly of cash generated by our insurance operations and income earned on our investment portfolio, less amounts paid for claims, interest expense and operating expenses, (2) investing cash flows related to the purchase, sale and maturity of investments and purchases of property and equipment and (3) financing cash flows generally from activities that impact our capital structure, such as changes in debt and shares outstanding, and dividend payments. The following table summarizes our consolidated cash flows from operating, investing and financing activities:

Summary of consolidated cash flows
|  | Six Months Ended June 30,
(In thousands) |  | 2023 |  | 2022
Total cash provided by (used in): |  |  |  |
Operating activities |  | $ | 356,948 |  |  | $ | 361,679 |
Investing activities |  | (157,028) |  |  | 289,586 |
Financing activities |  | (216,109) |  |  | (536,962) |
Increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents |  | $ | (16,189) |  |  | $ | 114,303 |

Net cash provided by operating activities for the six months ended June 30, 2023 decreased when compared with the same period of 2022 primarily due to an increase in losses paid, net of the reinsurance recoverable on paid losses and a decrease in net premiums received, offset by a decrease in interest expense paid on our outstanding debt obligations.
We also have purchase obligations totaling approximately $12.9 million which consist primarily of contracts related to our continued investment in our information technology infrastructure in the normal course of business. The majority of these obligations are under contracts that give us cancellation rights with notice. In the next twelve months we anticipate we will pay approximately $5.3 million for our purchase obligations.
Net cash used in investing activities for the six months ended June 30, 2023 primarily reflects purchases of fixed income and equity securities during the period that exceeded sales and maturities of fixed income and equity securities during the period as cash from operations was available for additional investment. Net cash provided by investing activities for the six months ended June 30, 2022 primarily reflects sales and maturities of fixed income and equity securities during the period that exceeded purchases as proceeds were used in financing activities.
Net cash used in financing activities for the six months ended June 30, 2023 primarily reflects the repurchases of our common stock and dividends to shareholders. Net cash used in financing activities for the six months ended June 30, 2022 primarily reflects the repurchase of our common stock, repayment of our FHLB Advance, the repurchase of a portion of our 9% Debentures and dividends to shareholders.
Capitalization
Debt - holding company
As of June 30, 2023, our holding company’s debt obligations were $671.0 million in aggregate principal amount consisting of our 5.25% Notes and 9% Debentures.
Liquidity analysis - holding company
As of June 30, 2023, we had approximately $816.5 million in cash and investments at our holding company. Resources are maintained to service our debt interest expense, pay debt maturities, repurchase debt, and to settle intercompany obligations. We also use holding company resources to repurchase shares and pay dividends to shareholders. While these assets are held, we generate investment income that serves to offset a portion of our cash requirements. The payment of dividends from MGIC are the principal sources of holding company cash inflow and their payment is restricted by insurance regulation. See Note 14 - “Statutory Information” to our consolidated financial statement for additional information about MGIC’s dividend restrictions. The payment of dividends from MGIC is also influenced by our view of the appropriate level of PMIERs Available Assets to maintain in excess of Minimum Required Assets. Other sources of holding company liquidity include raising capital in the public markets. The ability to raise capital in the public markets is subject to prevailing market conditions, investor demand for the securities to be issued, and our deemed creditworthiness.
In the first half of 2023, we paid $58.8 million in dividends to shareholders. On July 27, 2023, the Board of Directors declared a quarterly cash dividend to holders of the company’s common stock of $0.115 per share to shareholders of record on August 10, 2023, payable on August 24, 2023.
In the first six months of 2023, our holding company cash and investments increased by $170.0 million. The net unrealized losses on our holding company investment portfolio were approximately $9.5 million at June 30, 2023, and the portfolio had a modified duration of approximately 1.1 years.
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Significant cash and investments inflows at our holding company during the first six months:
•$300.0 million dividend received from MGIC
•$73.5 million intercompany tax receipts, and
•$8.5 million of investment income.
Significant cash outflows at our holding company during the first six months:
•$148.8 million of net share repurchase transactions,
•$58.8 million of cash dividends paid to shareholders, and
•$18.0 million of interest payments on our outstanding debt obligations.
MGIC paid $300.0 million in dividends to our holding company in the six months ended June 30, 2023. Future dividend payments from MGIC to the holding company will be determined in consultation with the board, and after considering any updated estimates about our business. We ask the Wisconsin OCI not to object before MGIC pays dividends to the holding company.
In the first six months of 2023, we repurchased 10.8 million shares of our common stock using $150.9 million of holding company cash. As of June 30, 2023 we had remaining authorization to repurchase $463.0 million of our common stock through July 1, 2025 under a share repurchase program approved by our Board of Directors in April 2023. In July 2023, we repurchased an additional 1.1 million shares totaling $18.5 million under the remaining authorization.
Scheduled debt maturities beyond the next twelve months include $650.0 million of our 5.25% Notes due in 2028, and $21.1 million of our 9% Debentures due in 2063. Subject to certain limitations and restrictions, holders of each of the 9% Debentures may convert their notes into shares of our common stock at their option under the terms of their issuance, in which case our corresponding obligation will be eliminated.
See Note 7 – “Debt” to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information about the conversion terms of our 9% Debentures and the terms of our indebtedness, including our option to defer interest on our 9% Debentures. The description in Note 7 - “Debt” to our consolidated financial statements in our Annual Report on Form 10-K is qualified in its entirety by the terms of the notes and debentures.
Over the next twelve months the principal demand on our holding company resources will be interest payments on our 5.25% Notes and 9% Debentures approximating $36.0 million and dividends to shareholders. We believe our holding company has sufficient sources of liquidity to meet its payment obligations for the foreseeable future.
We may also use additional holding company cash to repurchase additional shares or to repurchase our outstanding debt obligations. Such repurchases may be material, may be made for cash (funded by debt) and/or exchanges for other securities, and may be made in open market purchases (including through 10b5-1 plans), privately negotiated acquisitions or other transactions. See "Overview-Capital" of this MD&A for a discussion of our share repurchase programs.
Debt at subsidiaries
MGIC did not have any outstanding debt obligations at June 30, 2023. MGIC is a member of the FHLB, which provides MGIC access to an additional source of liquidity via a secured lending facility. We may borrow from the FHLB at any time.
Capital Adequacy
PMIERs
As of June 30, 2023, MGIC’s Available Assets under the PMIERs totaled approximately $5.8 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. Our reinsurance transactions provided an aggregate of approximately $2.2 billion of capital credit under the PMIERs as of June 30, 2023. Refer to Note 4 - “Reinsurance” to our consolidated financial statements for additional information on our reinsurance transactions.
The PMIERs generally require us to hold significantly more Minimum Required Assets for delinquent loans than for performing loans and the Minimum Required Assets required to be held increases as the number of payments missed on a delinquent loan increases.
Refer to “Overview - Capital - GSEs” of this MD&A and 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” for further discussion of PMIERs.
Risk-to-capital
We compute our risk-to-capital ratio on a separate company statutory basis, as well as on a combined insurance operations basis. The risk-to-capital ratio is our net RIF divided by our policyholders’ position. Our net RIF includes both primary and pool risk in force, net of reinsurance and excludes risk on policies that are currently in default and for which case loss reserves have been established and the
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risk covered by reinsurance. The risk amount includes pools of loans with contractual aggregate loss limits and without these limits. MGIC’s policyholders’ position consists primarily of statutory policyholders’ surplus (which increases as a result of statutory net income and decreases as a result of statutory net loss and dividends paid), plus the statutory contingency loss reserve. The statutory contingency loss reserve is reported as a liability on the statutory balance sheet. A mortgage insurance company is required to make annual additions to a contingency loss reserve of approximately 50% of earned premiums. These contributions must generally be maintained for a period of ten years. However, with regulatory approval a mortgage insurance company may make early withdrawals from the contingency loss reserve when incurred losses exceed 35% of earned premiums in a calendar year.
The table below presents our risk-to-capital calculation:

Risk-to-capital - MGIC
(In millions, except ratio) |  | June 30, 2023 |  | December 31, 2022
RIF - net (1) |  | 55,738 |  |  | $ | 56,292 |
Statutory policyholders’ surplus |  | 775 |  |  | 921 |
Statutory contingency loss reserve |  | 4,866 |  |  | 4,597 |
Statutory policyholders’ position |  | $ | 5,641 |  |  | $ | 5,518 |
Risk-to-capital |  | 9.9:1 |  | 10.2:1

(1)RIF – net, as shown in the table above is net of reinsurance and exposure on policies currently delinquent ($1.4 billion at both June 30, 2023 and December 31, 2022) for which loss reserves have been established.
For additional information regarding regulatory capital see Note 14 – “Statutory Information” to our consolidated financial statements as well as our Risk Factor titled “State Capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis.”
Financial Strength Ratings

MGIC financial strength ratings
Rating Agency |  | Rating |  | Outlook
Moody’s Investor Services |  | A3 |  | Stable
Standard and Poor’s Rating Services |  | BBB+ |  | Stable
A.M. Best |  | A- |  | Stable

MAC financial strength ratings
Rating Agency |  | Rating |  | Outlook
A.M. Best |  | A- |  | Stable

For further information about the importance of MGIC’s ratings, see 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.”
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Forward Looking Statements and Risk Factors
General: Our business, results of operations, and financial condition could be affected by the Risk Factors referred to under “Location of Risk Factors” below. These Risk Factors are an integral part of Management’s Discussion and Analysis.
These factors may also cause actual results to differ materially from the results contemplated by forward looking statements that we may make. Forward looking statements consist of statements which relate to matters other than historical fact. Among others, statements that include words such as we “believe,” “anticipate” or “expect,” or words of similar import, are forward looking statements. These Risk Factors speak only as of the date of this filing and are subject to change without notice as the Company cannot predict all risks relating to this evolving set of events. We are not undertaking any obligation to update any forward looking statements we may make even though these statements may be affected by events or circumstances occurring after the forward looking statements were made. Therefore, no reader of this document should rely on these statements being current as of any time other than the time at which this document was filed with the Securities and Exchange Commission.
While we communicate with security analysts from time to time, it is against our policy to disclose to them any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report, and such reports are not our responsibility.
Location of Risk Factors: The Risk Factors are in Item 1 A of our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by Part II, Item 1 A of our quarterly report on Form 10Q for the quarter ended March 31, 2023, and Part II, Item 1 A of this Quarterly Report on Form 10-Q. The Risk Factors in the 10-K, as supplemented by this 10‑Qs and through updating of various statistical and other information, are reproduced in Exhibit 99 to this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our investment portfolio is essentially a fixed income portfolio and is exposed to market risk. Important drivers of the market risk are credit spread risk and interest rate risk.
Credit spread risk is the risk that we will incur a loss due to adverse changes in credit spreads. Credit spread is the additional yield on fixed income securities above the risk-free rate (typically referenced as the yield on U.S. Treasury securities) that market participants require to compensate them for assuming credit, liquidity and/or prepayment risks.
We manage credit risk via our investment policy guidelines which primarily place our investments in investment grade securities and limit the amount of our credit exposure to any one issue, issuer and type of instrument. Guideline and investment portfolio detail is available in "Business – Section E, Investment Portfolio" in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2022.
Interest rate risk is the risk that we will incur a loss due to adverse changes in interest rates relative to the characteristics of our interest bearing assets.
One of the measures used to quantify this exposure is modified duration. Modified duration measures the price sensitivity of the assets to the changes in spreads. At June 30, 2023, the modified duration of our fixed income investment portfolio was 4.2 years, which means that an instantaneous parallel shift in the yield curve of 100 basis points would result in a change of 4.2% 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. See Note 7 – “Investments” to our consolidated financial statements for additional disclosure surrounding our investment portfolio.
Item 4. Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer concluded that such controls and procedures were effective as of the end of such period. There was no change in our internal control over financial reporting that occurred during the second quarter of 2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Certain legal proceedings arising in the ordinary course of business may be filed or pending against us from time to time. For information about such legal proceedings, you should review Note 5 - “Litigation and Contingencies” to our consolidated financial statements and our Risk Factor titled “We are subject to the risk of legal proceedings in the future” in Exhibit 99.
Item 1 A. Risk Factors
With the exception of the changes described and set forth below, there have been no material changes in our Risk Factors from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The risk factors in the 10-K, as supplemented by this 10-Q and through updating of various statistical and other information, are reproduced in their entirety in Exhibit 99 to this Quarterly Report on Form 10‑Q.
The ICE Benchmark Administration, the administrator of LIBOR, ceased publishing all USD LIBOR tenors on June 30, 2023. We have evaluated the impact of the discontinuance of LIBOR on our consolidated financial statements and have determined it will not have a material impact. As such, the risk factor titled “The Company may be adversely impacted by the transition from LIBOR as a reference rate“ has been deleted.
Risk Factors Relating to the Mortgage Insurance Industry and its Regulation
State capital requirements may prevent us from continuing to write new insurance on an uninterrupted basis.
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 its risk in force (or a similar measure) in order for the mortgage insurer to continue to write new business. We refer to these requirements as the “State Capital Requirements.” While they vary among jurisdictions, the most common State Capital Requirements allow for a maximum risk-to-capital ratio of 25 to 1. 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 minimum policyholder position (“MPP”). MGIC's “policyholder position” includes its net worth, or surplus, and its contingency reserve.
At June 30, 2023, MGIC’s risk-to-capital ratio was 9.9 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 $2.1 billion. Our risk-to-capital ratio and MPP reflect credit for the risk ceded under our quota share reinsurance and excess of loss transactions in the traditional reinsurance and ILN markets with unaffiliated reinsurers. If MGIC is not allowed an agreed level of credit under the State Capital Requirements, MGIC may terminate the reinsurance transactions, without penalty.
The NAIC previously announced plans to revise the State Capital Requirements that are provided for in its Mortgage Guaranty Insurance Model Act. In December 2019, a working group of state regulators released an exposure draft of a revised Mortgage Guaranty Insurance Model Act and a risk-based capital framework to establish capital requirements for mortgage insurers. Subsequent drafts and a final version released in May 2023 did not include changes to the capital requirements of the existing Model Act. In July 2023, the NAIC working group voted to adopt the version of the Model Act released in May 2023, with some additional changes, but no changes to the capital requirements. It is expected that the full NAIC will adopt the revised Model Act sometime during 2023, but it is uncertain when the revised Model Act will be adopted in any jurisdiction and whether any changes will be made by state legislatures prior to such adoption.
While MGIC currently meets the State Capital Requirements of Wisconsin and all other jurisdictions, it could be prevented from writing new business in the future in all jurisdictions if it fails to meet the State Capital Requirements of Wisconsin, or it could be prevented from writing new business in a particular jurisdiction if it fails to meet the State Capital Requirements of that jurisdiction, and in each case if MGIC does not obtain a waiver of such requirements. It is possible that regulatory action by one or more jurisdictions, including those that do not have specific State Capital Requirements, may prevent MGIC from continuing to write new insurance in such jurisdictions. If we are unable to write business in a particular jurisdiction, lenders may be unwilling to procure insurance from us anywhere. In addition, a lender’s assessment of the future ability of our insurance operations to meet the State Capital Requirements or the PMIERs may affect its willingness to procure insurance from us. In this regard, see 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.” A possible future failure by MGIC to meet the State Capital Requirements or the PMIERs will not necessarily mean that MGIC lacks sufficient resources to pay claims on its insurance liabilities. You should read the rest of these risk factors for information about matters that could negatively affect MGIC’s compliance with State Capital Requirements and its claims paying resources.
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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.
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. Department of Veterans Affairs ("VA") and other government mortgage insurance programs, and
•lenders originating mortgages using piggyback structures to avoid private mortgage insurance, such as a first mortgage with an 80% loan-to-value ("LTV") ratio and a second mortgage with a 10%, 15% or 20% LTV ratio rather than a first mortgage with a 90%, 95% or 100% LTV ratio that has private mortgage insurance.
The GSEs’ charters generally require credit enhancement for a low down payment mortgage loan (a loan in an amount that exceeds 80% of a home’s value) in order for such loan to be eligible for purchase by the GSEs. Private mortgage insurance generally has been purchased by lenders in primary mortgage market transactions to satisfy this credit enhancement requirement. 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. These programs, which currently account for a small percentage of the low down payment market, compete with traditional private mortgage insurance and, due to differences in policy terms, they may offer premium rates that are below prevalent single premium lender-paid mortgage insurance ("LPMI") rates. We participate in these programs from time to time. 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” for a discussion of various business practices of the GSEs that may be changed, including through expansion or modification of these programs.
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.
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). 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. On February 22, 2023, the FHA announced a 30-basis point decrease in its mortgage insurance premium rates. This rate reduction will negatively impact our NIW; however, given the many factors that influence the FHA's market share, it is difficult to predict the extent of the impact. In addition, we cannot predict how the factors that affect the FHA's share of NIW will change in the future.
The VA's share of the low down payment residential mortgages that were subject to FHA, VA, USDA or primary private mortgage insurance was 24.5% in 2022, 30.2% in 2021, and 30.9% in 2020. Beginning in 2012, the VA’s share has been as low as 22.8% (in 2013) and as high as 30.9% (in 2020). We believe that the VA’s market share grows as the number of borrowers that are eligible for the VA’s program increases, and when eligible borrowers opt to use the VA program when refinancing their mortgages. The VA program offers 100% LTV ratio loans and charges a one-time funding fee that can be included in the loan amount.
In July 2023, the Federal Reserve Board, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency proposed a revised regulatory capital rule that would impose higher capital standards on large U.S. banks. Under the proposed regulation, affected banks would no longer receive capital relief from mortgage insurance on loans held in their portfolios. If adopted as proposed, the regulation is expected to have a negative effect on our NIW; however, at this time it is difficult to predict the extent of the impact.
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Risk Factors Relating to Our Business Generally
The mix of business we write affects our Minimum Required Assets under the PMIERs, our premium yields and the likelihood of losses occurring.
The Minimum Required Assets under the PMIERs are, in part, a function of the direct risk-in-force and the risk profile of the loans we insure, considering LTV ratio, credit score, vintage, Home Affordable Refinance Program ("HARP") status and delinquency status; and whether the loans were insured under lender-paid mortgage insurance policies or other policies that are not subject to automatic termination consistent with the Homeowners Protection Act requirements for borrower-paid mortgage insurance. 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.
The percentage of our NIW from all single premium policies was 3.3% in the first half of 2023. Beginning in 2012, the annual percentage of our NIW from single policies has been as low as 4.3% in 2022 and as high as 20.4% in 2015. Depending on the actual life of a single premium policy and its premium rate relative to that of a monthly premium policy, a single premium policy may generate more or less premium than a monthly premium policy over its life.
As discussed in our risk factor titled "Reinsurance may not always be available or its cost may increase," we have in place various QSR transactions. Although the transactions reduce our premiums, they have a lesser impact on our overall results, as losses ceded under the transactions reduce our losses incurred and the ceding commissions we receive reduce our underwriting expenses. The effect of the QSR transactions on the various components of pre-tax income will vary from period to period, depending on the level of ceded losses incurred. We also have in place various XOL reinsurance transactions under which we cede premiums. Under the XOL reinsurance transactions, for the respective reinsurance coverage periods, we retain the first layer of aggregate losses and the reinsurers provide second layer coverage up to the outstanding reinsurance coverage amount.
In addition to the effect of reinsurance on our premiums, we expect a decline in our premium yield (net premiums earned divided by the average insurance in force) over time as a large percentage of our current IIF is from book years with lower premium rates due a decline in premium rates in recent years resulting from pricing competition, insuring mortgages with lower risk characteristics, lower required capital, and certain policies undergoing premium rate resets on their ten-year anniversaries. Refinance transactions on single premium policies benefit our premium yield due to the impact of accelerated earned premium from cancellation prior to their estimated life. Recent low levels of refinance transactions have reduced that benefit.
Our ability to rescind insurance coverage became more limited for new insurance written beginning in mid-2012, and it became further limited for new insurance written under our revised master policy that became effective March 1, 2020. These limitations may result in higher losses paid than would be the case under our previous master policies.
From time to time, in response to market conditions, we change the types of loans that we insure. We also may change our underwriting guidelines, including by agreeing with certain approval recommendations from a GSE automated underwriting system. We also make exceptions to our underwriting requirements on a loan-by-loan basis and for certain customer programs. Our underwriting requirements are available on our website at http://www.mgic.com/underwriting/index.html.
Even when home prices are stable or rising, mortgages with certain characteristics have higher probabilities of claims. As of June 30, 2023, mortgages with these characteristics in our primary risk in force included mortgages with LTV ratios greater than 95% (15%), 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) (16%), each attribute as determined at the time of loan origination. Loans with more than one of these attributes accounted for 4% of our primary risk in force as of June 30, 2023, and 4% of our primary risk in force as of December 31, 2022 and December 31, 2021. 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 the first half of 2023, 13% in the first half of 2022, and 12% for the full year of 2022. Our NIW on mortgages with DTI ratios greater than 45% was 23% in the first half of 2023, 19% for the first half of 2022, and 21% for the full year of 2022.
From time to time, we change the processes we use to underwrite loans. 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 acceptance of automated GSE appraisal and income verification tools, GSE appraisal waivers and GSE appraisal flexibilities may affect our pricing and risk assessment. We also continue to further automate our underwriting processes and it is possible that our automated processes result in our insuring loans that we would not otherwise have insured under our prior processes.
Approximately 72% of our first half 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. For loans originated through a delegated underwriting program, we depend on the originators' compliance with our guidelines and rely on the originators'
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representations that the loans being insured satisfy the underwriting guidelines, eligibility criteria and other requirements. While we have established systems and processes to monitor whether certain aspects of our underwriting guidelines were being followed by the originators, such systems may not ensure that the guidelines were being strictly followed at the time the loans were originated.
The widespread use of risk-based pricing systems by the private mortgage insurance industry (discussed 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") makes it more difficult to compare our premium rates to those offered by our competitors. We may not be aware of industry rate changes until we observe that our mix of new insurance written has changed and our mix may fluctuate more as a result.
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. The focus of the new FHFA leadership on increasing homeownership opportunities for borrowers is likely to have this effect. Lenders could pressure mortgage insurers to insure such loans, which are expected to experience higher claim rates. Although we attempt to incorporate these higher expected claim rates into our underwriting and pricing models, there can be no assurance that the premiums earned and the associated investment income will be adequate to compensate for actual losses paid even under our current underwriting requirements.
Competition or changes in our relationships with our customers could reduce our revenues, reduce our premium yields and / or increase our losses.
The private mortgage insurance industry is highly competitive and is expected to remain so. 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.
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).
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. The widespread use of risk-based pricing systems by the private mortgage insurance 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. 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. Regarding the concentration of our new business, our top ten customers accounted for approximately 36% and 33% in the twelve months ended June 30, 2023 and June 30, 2022, respectively.
We monitor various competitive and economic factors while seeking to balance both profitability and market share considerations in developing our pricing strategies. Our premium yield is expected to decline over time as older insurance policies with premium rates that are generally higher run off and new insurance policies with premium rates that are generally lower remain on our books.
Certain of our competitors have access to capital at a lower cost than we do (including, through off-shore intercompany reinsurance vehicles, which have tax advantages that may increase if U.S. corporate income taxes increase). 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."
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. 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.
•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. We could be competitively disadvantaged with some market participants because the financial strength ratings of our insurance subsidiaries are lower than those of some competitors. MGIC's financial strength rating from A.M. 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).
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•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. 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. Although we are currently unaware of a direct impact on MGIC, this could potentially become a competitive disadvantage in the future.
Standard & Poor’s is considering changes to its rating methodologies for insurers, including mortgage insurers. It is uncertain what impact the changes will have, whether they will prompt similar moves at other rating agencies, or the extent to which they will impact how external parties evaluate the different rating levels.
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Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
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 June 30, 2023.

Share 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 programs (1)
April 1, 2023 |  | April 30, 2023 |  | 1,748,720 |  |  | $ | 13.98 |  |  | 1,748,720 |  |  | $ | 511,991,953 |
May 1, 2023 |  | May 31, 2023 |  | 1,745,824 |  |  | 14.89 |  |  | 1,745,824 |  |  | 485,998,066 |
June 1, 2023 |  | June 30, 2023 |  | 1,456,403 |  |  | 15.49 |  |  | 1,456,403 |  |  | $ | 463,434,664 |
|  |  |  | 4,950,947 |  |  | $ | 14.75 |  |  | 4,950,947 |  |  |

(1)In April 2023, our Board of Directors authorized a share repurchase program under which as of June 30, 2023, we may repurchase up to an additional $463 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.
Item 5. Other Information
During the three months ended June 30, 2023, none of our officers or directors adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Item 6. Exhibits
The accompanying Index to Exhibits is incorporated by reference in answer to this portion of this Item, and except as otherwise indicated in the next sentence, the Exhibits listed in such Index are filed as part of this Form 10-Q. Exhibit 32 is not filed as part of this Form 10-Q but accompanies this Form 10-Q.
(Part II, Item 6)
Index to exhibits

Exhibit Number |  | Description of Exhibit | Form | Exhibit(s) | Filing Date |  |  |  |
31.1 |  | Certification of CEO under Section 302 of Sarbanes-Oxley Act of 2002 † |  |  |  |  |  |  |
31.2 |  | Certification of CFO under Section 302 of Sarbanes-Oxley Act of 2002 † |  |  |  |  |  |  |
32 |  | Certification of CEO and CFO under Section 906 of Sarbanes-Oxley Act of 2002 (as indicated in Item 6 of Part II, this Exhibit is not being “filed”) †† |  |  |  |  |  |  |
99 |  | Risk Factors included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2023 and through updating of various statistical and other information † |  |  |  |  |  |  |
101.INS |  | Inline XBRL Instance Document |  |  |  |  |  |  |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  |  |  |  |  |  |
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  |  |  |
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  |  |  |
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  |  |  |
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  |  |  |  |  |  |

* Denotes a management contract or compensatory plan.
† Filed herewith.
†† Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on August 2, 2023.

| MGIC INVESTMENT CORPORATION
| /s/ Nathaniel H. Colson
| Nathaniel H. Colson
| Executive Vice President and
| Chief Financial Officer
| /s/ Julie K. Sperber
| Julie K. Sperber
| Vice President, Controller and Chief Accounting Officer

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