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Reinsurance | 12 Months Ended
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Dec. 31, 2024
Reinsurance Disclosures [Abstract] |
Reinsurance | Reinsurance Our consolidated financial statements reflect the effects of assumed and ceded reinsurance transactions. Assumed reinsurance refers to the acceptance of certain insurance risks that other insurance companies have underwritten. Ceded reinsurance involves transferring certain insurance risks we have underwritten to other insurance companies who agree to share these risks. The purpose of ceded reinsurance is to protect us, at a cost, against losses arising from our mortgage guaranty policies covered by the agreement and to manage our capital requirements under PMIERs. Reinsurance is currently placed on a quota share and excess of loss basis. Table 9.1 below shows the effect of all reinsurance agreements on premiums earned and losses incurred as reflected in the consolidated statements of operations.
Reinsurance
Table | 9.1 |  |  |  |  |  |
|  | Years ended December 31,
(In thousands) |  | 2024 |  | 2023 |  | 2022
Premiums earned: |  |  |  |  |  |
Direct |  | $ | 1,138,245 |  |  | $ | 1,142,412 |  |  | $ | 1,154,728 |
Assumed |  | 14,458 |  |  | 12,960 |  |  | 8,778 |
Ceded: |  |  |  |  |  |
Ceded - quota share reinsurance (1) |  | (115,306) |  |  | (123,955) |  |  | (86,435) |
Ceded - excess-of-loss reinsurance |  | (66,590) |  |  | (78,866) |  |  | (69,938) |
Total ceded |  | (181,896) |  |  | (202,821) |  |  | (156,373) |
Net premiums earned |  | $ | 970,807 |  |  | $ | 952,551 |  |  | $ | 1,007,133 |
Losses incurred: |  |  |  |  |  |
Direct |  | $ | 5,714 |  |  | $ | (5,200) |  |  | $ | (274,072) |
Assumed |  | 32 |  |  | (33) |  |  | (330) |
Ceded - quota share reinsurance |  | (20,607) |  |  | (15,623) |  |  | 19,837 |
Losses incurred, net |  | $ | (14,861) |  |  | $ | (20,856) |  |  | $ | (254,565) |
Other Reinsurance Impacts: |  |  |  |  |  |
Profit commission on quota share reinsurance (1) |  | $ | 108,368 |  |  | $ | 133,145 |  |  | $ | 176,084 |
Ceding commission on quota share reinsurance |  | 44,532 |  |  | 50,397 |  |  | 52,071 |
(1)Ceded premiums earned are shown net of profit commission. QUOTA SHARE REINSURANCE We have entered into QSR transactions with panels of third-party reinsurers to cede a fixed percentage of premiums earned and received and losses incurred on insurance covered by the transactions. We receive the benefit of a ceding commission equal to 20% of premiums ceded before profit commission. We also receive the benefit of a profit commission through a reduction of premiums we cede. The profit commission varies inversely with the level of losses on a “dollar for dollar” basis and can be eliminated at annual loss ratios higher than we have experienced on our QSR transactions. Ceded losses incurred are impacted by the delinquencies covered by our QSR Transactions, our estimates of payments that will be ultimately made on those delinquencies, and claim payments covered by our QSR Transactions. Each of our QSR transactions typically have annual loss ratio caps of 300% and lifetime loss ratios of 200%. Table 9.2 below provides additional detail regarding our QSR transactions in effect during 2024.
Reinsurance
Table | 9.2 |  |  |  |  |  |  |
Quota Share Contract |  | Covered Policy Years | Quota Share % |  | Annual Loss Ratio to Exhaust Profit Commission (1) |  | Contractual Termination Date
2020 QSR and 2021 QSR | (2) | 2021 | 17.5 | % |  | 61.9 | % |  | 'December 31, 2036
2021 QSR and 2022 QSR | (3) | 2021 | 12.5 | % |  | 57.5 | % |  | 'December 31, 2036
2021 QSR and 2022 QSR |  | 2022 | 15.0 | % |  | 57.5 | % |  | December 31, 2033
2022 QSR and 2023 QSR |  | 2022 | 15.0 | % |  | 62.0 | % |  | December 31, 2033
2022 QSR and 2023 QSR |  | 2023 | 15.0 | % |  | 62.0 | % |  | December 31, 2034
2023 QSR |  | 2023 | 10.0 | % |  | 58.5 | % |  | December 31, 2034
2024 QSR |  | 2024 | 30.0 | % |  | 56.0 | % |  | 'December 31, 2035
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. (2)Effective December 31, 2024, we agreed to amended terms with certain participants on our 2020 QSR and 2021 QSR Transaction covering policy year 2021 reducing the quota share cede rate to 14.8%. Under the amended terms we will generally receive an annual profit commission provided the annual loss ratio on loans covered under the transaction remain below 69%. (3)Effective December 31, 2024, we agreed to amended terms with certain participants on our 2021 QSR and 2022 QSR Transaction covering policy year 2021 reducing the quota share cede rate to 11.1%. Under the amended terms we will generally receive an annual profit commission provided the annual loss ratio on loans covered under the transaction remain below 69%. We executed a 40% QSR transaction with a group of unaffiliated reinsurers covering most of our new insurance written in 2025 and 2026. Generally, we will receive an annual profit commission provided the annual loss ratio on the loans covered under the transaction remains below 63.0% and 62.0% on 2025 and 2026 new insurance written, respectively. 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 9.3 provides additional detail 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 9.2 to the percentage shown in 9.3.
Reinsurance
Table 9.3 |  |  |  |  |  |
Quota Share Contract | Covered Policy Years | Optional Termination Date (1) |  | Optional Quota Share % Reduction Date (2) |  | Optional Reduced Quota Share %
2020 QSR and 2021 QSR (3) | 2021 | December 31, 2027 |  | January 1, 2028 |  | 12.3% or 10%
2021 QSR and 2022 QSR (3) | 2021 | December 31, 2027 |  | January 1, 2028 |  | 9.4% or 7%
2021 QSR and 2022 QSR | 2022 | July 1 , 2025 |  | January 1, 2025 |  | 12.5% or 10%
2022 QSR and 2023 QSR | 2022 | July 1, 2025 |  | January 1, 2025 |  | 12.5% or 10%
2022 QSR and 2023 QSR | 2023 | December 31, 2025 |  | January 1, 2025 |  | 12.5% or 10%
2023 QSR | 2023 | December 31, 2025 |  | January 1, 2025 |  | 8% or 7%
2024 QSR | 2024 | December 31, 2027 |  | December 31, 2027 |  | 23% or 15%
(1) We can elect early termination of the QSR transaction beginning on this date, and bi-annually thereafter. (2) We can elect to reduce the quota share percentage beginning on this date, and bi-annually thereafter. (3) Terms of the agreement were amended effective December 31, 2024. We incurred an early termination fee of $1.0 million for our 2021 QSR Transaction effective December 31, 2024 for reinsurers who did not participate in the amended agreement. We incurred an early termination fee of $5.1 million for our 2020 QSR Transaction effective December 31, 2023, and $2.2 million for the termination of our 2019 QSR Transaction effective December 31, 2022. We also terminated our 2015 QSR Transaction effective December 31, 2022. The reinsurance recoverable on paid losses due from reinsurers for loss and LAE reserves incurred at the time of termination includes $2.7 million as of December 31, 2024 for reinsurers who chose not to participate in the 2021 QSR Transaction amendment, $9.4 million as December 31, 2023 from reinsurers participating in the 2020 QSR Transaction and $17.7 million as of December 31, 2022 from reinsurers participating in the 2015 and 2019 QSR Transactions. Under the terms of our QSR Transactions, ceded premiums, ceding commissions, profit commission, and ceded loss paid and LAE paid are settled net on a quarterly basis. The ceded premiums 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 $47.3 million as of December 31, 2024 and $33.3 million as of December 31, 2023. The reinsurance recoverable balance is secured by funds on deposit from the 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. An allowance for credit losses was not required as of December 31, 2024 or December 31, 2023. EXCESS OF LOSS REINSURANCE We have XOL Transactions with a panel of unaffiliated reinsurers executed through the traditional reinsurance market (“Traditional XOL Transactions”) and with unaffiliated special purpose insurers (“Home Re Transactions”). For the policies covered under our Traditional XOL Transactions, we retain the first layer of the aggregate losses paid, and the reinsurers will then provide second layer coverage up to the outstanding reinsurance coverage amount. We retain losses paid in excess of the outstanding reinsurance coverage amount. The reinsurance coverage is subject to adjustment based on the risk characteristics of the covered loans until the initial excess of loss reinsurance coverage layer has been finalized. We can elect to terminate our Traditional XOL Transactions under specified scenarios without penalty upon prior written notice, including if we will receive less than the full credit amount under the PMIERs, full financial statement credit or full credit under applicable regulatory capital requirements for the risk ceded in any required calculation period. The reinsurance premiums ceded under the Traditional XOL Transactions are based off the remaining reinsurance coverage levels. The reinsured coverage levels are secured by funds on deposit from reinsurers (which does not include letters of credit), the minimum amount of which is based on the greater of 1) a reinsurer's funding requirements under PMIERs or 2) ceded reserves and unpaid losses. Each of the reinsurers under our Traditional XOL Transactions has an insurer financial strength rating of A- or better (or a comparable rating) by Standard and Poor’s Rating Services, A.M. Best, Moody’s, or a combination of the three. The Home Re Transactions are executed with unaffiliated special purpose insurers (“Home Re Entities”). For the reinsurance coverage periods, we retain the first layer of the respective aggregate losses paid, and a Home Re Entity will then provide second layer coverage up to the outstanding reinsurance coverage amount. We retain losses paid in excess of the outstanding reinsurance coverage amount. Subject to certain conditions, the reinsurance coverage decreases as the underlying covered mortgages amortize or are repaid, or mortgage insurance losses are paid. The Home Re Entities financed the coverages by issuing mortgage insurance-linked notes (“ILNs”) to unaffiliated investors in an aggregate amount equal to the initial reinsurance coverage amounts. Each ILN is non-recourse to any assets of MGIC or affiliates. The proceeds of the ILNs, which were deposited into reinsurance trusts for the benefit of MGIC, will be the source of reinsurance claim payments to MGIC and principal repayments on the ILNs. Payment of principal on the related insurance-linked notes will be suspended and the reinsurance coverage available to MGIC under the transactions will not be reduced by such principal payments until a target level of credit enhancement is obtained or if certain thresholds or “Trigger Events” are reached, as defined in the related insurance-linked notes transaction agreement. As of December 31, 2024, there were no "Trigger Events". In 2024, we exercised our option to terminate the reinsurance agreement with Home Re 2020-1, Ltd. and Home Re 2018-1, Ltd. We also terminated our reinsurance agreement with Home Re 2019-1, Ltd. In connection with the terminations, the insurance linked notes issued by Home Re 2020-1 Ltd., Home Re 2019-1 Ltd, and Home Re 2018-1, Ltd. were redeemed in full. Table 9.4a , 9.4b, and 9.4c provide a summary of our XOL Transactions as of December 31, 2024, December 31, 2023 and December 31, 2022.
Excess of Loss Reinsurance
9.4a |  |  |  |
($ in thousands) | Issue Date | Policy In force Dates | Optional Call/ Termination Date (1) | Legal Maturity
2024 Traditional XOL | April 1, 2024 | January 1, 2024 - December 31, 2024 | January 1, 2030 | 10 years
2023 Traditional XOL | April 1, 2023 | January 1, 2023 - December 29, 2023 | January 1, 2031 | 10 years
2022 Traditional XOL | April 1, 2022 | January 1, 2022 - December 30, 2022 | January 1, 2030 | 10 years
Home Re 2023-1, Ltd. | October 23, 2023 | June 1, 2022 - August 31, 2023 | October 25, 2028 | 10 years
Home Re 2022-1, Ltd. | April 26, 2022 | May 29, 2021 - December 31, 2021 | April 25, 2028 | 12.5 years
Home Re 2021-2, Ltd. | August 3, 2021 | January 1, 2021 - May 28, 2021 | July 25, 2028 | 12.5 years
Home Re 2021-1, Ltd. | February 2, 2021 | August 1, 2020 - December 31, 2020 | January 25, 2028 | 12.5 years
(1)We have the right to terminate the Home Re Transactions under certain circumstances, including an optional call feature that provides us the right to terminate if the outstanding principal balance of the related insurance-linked notes falls below 10% of the initial principal balance of the related insurance-linked notes, and on any payment date on or after the respective Optional Call Date. We can elect early termination of the Traditional XOL Transactions beginning on this date, and quarterly thereafter.
Excess of Loss Reinsurance |  |
9.4b |  | Remaining First Layer Retention
($ in thousands) | Initial First Layer Retention | December 31, 2024 | December 31, 2023 | December 31, 2022
2024 Traditional XOL | $ | 125,016 |  | $ | 125,016 |  | $ | — |  | $ | — |
2023 Traditional XOL | 70,578 |  | 70,401 |  | 70,578 |  | — |
2022 Traditional XOL | 82,523 |  | 81,112 |  | 82,346 |  | 82,517 |
Home Re 2023-1, Ltd. | 272,961 |  | 272,269 |  | 272,961 |  | — |
Home Re 2022-1, Ltd. | 325,589 |  | 322,566 |  | 325,001 |  | 325,576 |
Home Re 2021-2, Ltd. | 190,159 |  | 188,211 |  | 189,403 |  | 190,097 |
Home Re 2021-1, Ltd. | 211,159 |  | 210,027 |  | 210,831 |  | 211,102 |
9.4c |  |  |  | Remaining Excess of Loss Reinsurance Coverage (1)
($ in thousands) | Initial Excess of Loss Reinsurance Coverage (1) | Initial Funding Percentage (2) | Funding Percentage at 12/31/2024 (2) | December 31, 2024 | December 31, 2023 | December 31, 2022
2024 Traditional XOL | $ | 187,220 |  | N/A | N/A | $ | 187,220 |  | $ | — |  | $ | — |
2023 Traditional XOL | 96,942 |  | N/A | N/A | 91,404 |  | 96,942 |  | — |
2022 Traditional XOL | 142,642 |  | N/A | N/A | 124,344 |  | 142,642 |  | 142,642 |
Home Re 2023-1, Ltd. | 330,277 |  | 97 | % | 97 | % | 299,325 |  | 330,277 |  | — |
Home Re 2022-1, Ltd. | 473,575 |  | 100 | % | 100 | % | 305,639 |  | 420,731 |  | 473,575 |
Home Re 2021-2, Ltd. (3) | 398,429 |  | 100 | % | 85 | % | 132,424 |  | 173,960 |  | 352,084 |
Home Re 2021-1, Ltd. | 398,848 |  | 100 | % | 100 | % | 92,019 |  | 117,982 |  | 277,053 |
(1)The initial and remaining excess of loss reinsurance coverage is reduced by the applicable funding percentage. (2)The funding percentage represents the aggregate outstanding note balances divided by the aggregate ending coverage amounts. (3)The funding percentage on the 2021-2 was reduced from 100% after a tender offer was conducted in the fourth quarter of 2023. The reinsurance premiums ceded to each Home Re Entity are composed of coverage, initial expense and supplemental premiums. The coverage premiums are generally calculated as the difference between the amount of interest payable by the Home Re Entity on the remaining reinsurance coverage levels, and the investment income collected on the collateral assets held in reinsurance trust account and used to collateralize the Home Re Entity's reinsurance obligation to MGIC. The amount of monthly reinsurance coverage premium ceded will fluctuate due to changes in the reference rate and changes in money market rates that affect investment income collected on the assets in the reinsurance trust. As a result, we concluded that each Home Re Transaction contains an embedded derivative that is accounted for separately as a freestanding derivative. The fair values of the derivatives at December 31, 2024 and December 31, 2023, were not material to our consolidated balance sheet, and the change in fair values during the years ended December 31, 2024, December 31, 2023 and December 31, 2022 were not material to our consolidated statements of operations. (see Note 5 - "Investments" and Note 6 - "Fair Value Measurements" ). At the time the Home Re Transactions were entered into, we concluded that each Home Re Entity is a variable interest entity (“VIE”). A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make sufficient decisions relating to the entity’s operations through voting rights or do not substantively participate in gains and losses of the entity. Given that MGIC (1) does not have the unilateral power to direct the activities that most significantly affect each Home Re Entity’s economic performance and (2) does not have the obligation, outside the terms of the reinsurance agreement, to absorb losses or the right to receive benefits of each Home Re Entity that could be significant to the Home Re Entity, consolidation of the Home Re Entities is not required. We are required to disclose our maximum exposure to loss, which we consider to be an amount that we could be required to record in our statements of operations, as a result of our involvement with the VIEs under our Home Re Transactions. As of December 31, 2024, December 31, 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 9.5 presents the total assets of the Home Re Entities as of December 31, 2024 , December 31, 2023 and December 31, 2022.
Home Re Entities total assets |  |
Table | 9.5 |  |  |  |
(In thousands) |  |  |  |
Home Re Entity |  | Total VIE Assets
|  | December 31, 2024 | December 31, 2023 | December 31, 2022
Home Re 2023-1 Ltd. |  | $ | 303,733 |  | $ | 330,277 |  | $ | — |
Home Re 2022-1 Ltd. |  | 313,229 |  | 427,279 |  | 473,575 |
Home Re 2021-2 Ltd. |  | 136,486 |  | 174,431 |  | 357,340 |
Home Re 2021-1 Ltd. |  | 97,373 |  | 118,043 |  | 285,039 |
The reinsurance trust agreements provide that the trust assets may generally only be invested in certain money market funds that (1) 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, (2) 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 (3) 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 is 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 Note 2 - "Basis of Presentation" ).

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