Mgic Investment Corp Q4 FY2022 Earnings Call

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

Thanks, Dianna. Good morning, everyone. I'm pleased to report that we had another great quarter. And for that matter, we delivered exceptional financial results for the entire year while providing meaningful capital returns to our shareholders. Simply put, we have the best financial results in our 65-year history. We will get into details of the financial results throughout this call, but we again demonstrated the strength and flexibility of our capital position in the quarter and produced an annualized 16.9% return on equity. In the quarter, we earned $191 million of net income, an increase of 10% compared to the same period last year. For the full year, net income increased 36% to $865 million, an all-time high compared to $635 million in 2021. Insurance in force at the end of the quarter stood at more than $295 billion, a 7.6% increase from a year ago. The growth in insurance in force during the year reflects an increased persistency rate, offset by lower volumes of new insurance written. Persistency increased to 80% at the end of the quarter, up from 63% a year ago. In the quarter, we wrote $13 billion of NIW, and we finished the year with $76 billion of NIW. Although the volume of NIW is lower than the record volumes for the prior 2 years, 2022 was another great year, the third largest year in our 65-year history. We expect the reduction in our NIW volume for the fourth quarter to reflect the smaller MI market but also our market position as we continue to take actions based on the increased risk in the current environment with a focus on the continued long-term success of our company. Turning to the performance of our insurance in force portfolio. Approximately 80% of our insurance in force is from the 2020 and later book years, and the credit quality of those books remains strong. To date, we have not seen a material change in credit performance in our portfolio overall. We remain encouraged by the continued favorable employment trends and the positive credit trends we continue to experience, including the low level of early payment defaults, which we believe is a good indicator of near-term credit performance. I also want to highlight that the rapid home price appreciation experienced in the past couple of years allowed homeowners to build up significant equity. This equity, combined with the strong credit quality of our insured portfolio, should help reduce the incidence of claims on the related mortgages on much of our risk in force, even with the modest declines in home prices in recent months. Our comprehensive reinsurance program will also help mitigate potential losses. As a result of the strength and flexibility of our capital position during the year, we not only deployed capital to support new business and grow our insurance in force, we also paid $800 million in dividends from MGIC to the holding company. We used our strong capital position to repurchase most of the remaining convertible junior debentures due in 2026, repay MGIC's Federal Home Loan Bank advance, and redeem our senior notes due in 2023, reducing our leverage ratio to approximately 12% and annual interest expense by $25 million. We also returned approximately $500 million of capital to our shareholders through a combination of repurchasing common stock and paying common stock dividends, including a 25% increase in the quarterly dividend beginning in the third quarter. As I mentioned during last quarter's call, retiring debt and delevering has been a significant use of holding company cash in 2022. But with our debt-to-capital ratio in our target range and with the uncertainties and potential challenges in the economic environment in the near term, we continue to expect to retain higher levels of liquidity at the holding company. Our approach to capital management is dynamic, so that we may continue to achieve our objectives in changing or stressed economic environments. We continually assess and evaluate the level of capital at both the operating company and holding company, including the level of capital that we retain for future deployment versus return to shareholders. As part of our assessment, we consider the operating environment we are or expect to be in. We strive to be prudent and thoughtful in our capital allocation decision-making so that both the operating company and the holding company are positioned to achieve success in varying environments. Our balanced approach to capital management includes the use of forward commitment quota share reinsurance agreements and excess loss reinsurance agreements. These agreements reduce the volatility of losses in weaker economic environments and provide diversification and flexibility of sources of capital. Approximately 85% of our risk in force was covered to some extent by reinsurance transactions at the end of the fourth quarter. Drilling down further, approximately 97% of the risk in force relating to the 2020 and later books was covered to some extent by reinsurance transactions at the end of the fourth quarter. We agreed to terms on a quota share agreement that will cover most of the policies written in 2023. This is in addition to the 15% quota share reinsurance agreement we already have in place to cover the 2023 NIW, bringing the total quota share that will cover most of the policies written in 2023 to 25%. In light of the current economic environment and near-term uncertainties, let me take a few minutes to provide some detail on our approach to credit risk. We employ a comprehensive risk management framework that includes our proprietary risk-based pricing engine for the majority of our customers, MiQ. MiQ allows for frequent and granular pricing changes, including those to address our view of emerging and evolving market conditions and risks. We take actions intended to manage the mix of our portfolio, including expected returns with the goal of positioning ourselves for continued success in changing environments. The timing between taking actions and the resulting NIW is not immediate, as pricing leads NIW by a month or two on average. So what you see in the Q4 NIW is primarily a reflection of our views of risk return from last fall. While we won't comment on current market positioning given competitive considerations, our internal analytics indicates that our lower Q4 NIW was likely impacted by both the smaller MI market and a market share that was down a couple of percentage points in the fourth quarter. Our market position continues to be defensive in recent months, which we expect will lead to further declines in our market share in the first quarter of 2023 and may be larger than the expected decline in the fourth quarter. We are comfortable with our actions and the results because it's reflective of our views of risk return while maintaining focus on our customer relationships and the continued long-term success of our company. With that, let me turn it over to Nathan.

Thanks, Tim, and good morning. As Tim mentioned, we had another strong quarter. We earned $191 million of net income or $0.64 per diluted share compared to $0.52 per diluted share during the fourth quarter last year. For the full year, we earned $865 million in net income compared to $635 million last year. On an adjusted net operating income basis, we earned $2.91 per diluted share, a 52% increase from $1.91 last year. A detailed reconciliation of GAAP net income to adjusted net operating income can be found in our earnings release, but the primary differences in the past two years have been losses on debt extinguishment from our debt reduction actions. The results for the fourth quarter and the full year were reflective of continued strong credit performance, which has led to favorable loss reserve development and resulted in losses incurred being negative each quarter in 2022. Net losses incurred were negative $31 million in the fourth quarter compared to negative $25 million in the fourth quarter last year. For the full year, losses incurred were negative $255 million compared to $65 million last year. Our review and reestimation of ultimate losses on prior delinquencies resulted in $76 million of favorable loss reserve development compared to $141 million of favorable loss reserve development last quarter and $56 million of favorable loss reserve development in the fourth quarter of last year. The favorable development in the quarter was primarily related to new delinquencies from 2020 and 2021. As the cure rate on those delinquencies continues to exceed our expectations, we have continued to adjust our ultimate loss expectations. In the quarter, the delinquency inventory increased by 2% to 26,400 loans. In the quarter, we received 11,900 new delinquency notices compared to 11,000 last quarter and 13,700 in the fourth quarter of 2019 before the start of the COVID-19 pandemic. We continue to expect that the level of new delinquency notices may increase due to the seasoning of the large 2020 and 2021 vintages into what are historically the peak loss emergence years. During the quarter, total revenues were $292 million compared to $294 million for the same period last year. For the full year, total revenue was $1.2 billion, flat with last year. Net premiums earned were $244 million in the quarter compared to $253 million last year. The decrease in net premium earned was primarily due to a decrease in accelerated single premium cancellation, an increase in ceded premiums, and a decrease in our premium yield, offset somewhat by growth in our insurance in force. The in-force premium yield was 38.9 basis points in the quarter, down 1/10 basis point from last quarter. The in-force portfolio yield reflects the premium rates in effect on our insurance in force and has been declining for some time, but the pace of decline has been slowing in recent quarters. With the smaller origination market, higher persistency, and continued high credit quality for NIW that we expect in 2023, we expect the in-force premium yield to remain relatively flat during 2023. Book value per share increased 4.4% during the quarter to $15.82 from $15.16 last quarter and $15.18 at the end of 2021. Unrealized losses in the investment portfolio due to higher interest rates continue to be a headwind for book value per share, reducing book value per share by $1.39 at year-end, while unrealized gains on the investment portfolio added $0.47 per share last year. While higher interest rates are a headwind for book value per share in the short term, higher interest rates are a long-term positive for the earnings potential of the investment portfolio and that is starting to come through the results. The book yield on the investment portfolio ended the year at 3%, up 20 basis points in the fourth quarter and 50 basis points from the end of last year. Sequentially, investment income was up approximately $4 million in the quarter and up $7 million from the fourth quarter of last year. Assuming a similar interest rate environment, we expect the book yield on the investment portfolio will continue to increase during the year and approach 3.5% by the end of 2023 as reinvestment rates remain significantly higher than the current book yield. Operating expenses in the quarter were $74 million, up from $62 million last quarter and $46 million in the fourth quarter last year. For the full year, expenses were $249 million compared to $211 million last year. The increase in expenses during the fourth quarter compared to recent quarters was primarily due to higher pension settlement costs in the fourth quarter. Other factors impacting full-year expenses included higher performance-based compensation expense due to our exceptional financial results in 2022, as well as continued technology investments, particularly in our data and analytics infrastructures. We expect full-year operating expenses will be down modestly in 2023 in the range of $235 million to $245 million. Turning to our capital management activities. Our priorities have been consistent and include maintaining the financial strength and flexibility of the holding company and deploying capital for growth at the writing company. For the holding company, this means maintaining a target level of liquidity in excess of near-term needs. At the operating company, it means maintaining a robust level of PMIERs excess that we expect will enable growth in changing operating environments. During the fourth quarter, the capital levels at MGIC and liquidity levels at the holding company were above our targets, and we paid a $400 million dividend from MGIC to the holding company. Consistent with our capital strategy, we repurchased 6.1 million outstanding shares of common stock for a total cost of $80 million, and we paid a $0.10 per share dividend to our shareholders for a total of $30 million. The holding company ended the year with cash and investments of $647 million. In January of this year, we repurchased an additional 2.1 million shares for $28 million, and our Board authorized a $0.10 per share common stock dividend payable on March 2. At the end of January, we had $87 million remaining on our current share repurchase authorization, which we expect to exhaust in the first half of 2023. Any additional share repurchase authorization will be determined in consultation with the Board. At the end of 2022, MGIC had $2.3 billion of available assets in excess of the PMIERs minimum requirements compared with $2.2 billion excess at the end of 2021. Throughout 2022, MGIC's capital level was above our target. Consistent with our capital strategy, we received OCI approval and paid $800 million in dividends from MGIC to the holding company. Future dividends from MGIC to the holding company will also require OCI approval. As we mentioned last quarter, in the near term, we expect to retain higher levels of liquidity at the holding company. Part of the reason for maintaining higher levels of liquidity at the holding company is the outlook for future dividends from the operating company is more uncertain than in the past 18 months. We will evaluate future dividends to the holding company using a consistent framework, but if we experience a more challenged economic environment for mortgage credit, that will impact our target capital levels, which could extend the time between dividends or reduce the amount of future dividends. Our strong capital position entering 2022, combined with the exceptional financial results during the year, position us to reduce our debt outstanding by approximately $500 million, increased our quarterly shareholder dividend by 25%, reduced diluted shares by more than 10%, and end the year with a stronger excess capital position relative to PMIERs than we started the year. With that, let me turn it back over to Tim.

Thanks, Nathan. A few additional comments before we open it up for questions. In January, under the direction of FHFA, the GSEs announced certain pricing changes effective May 1 of this year. Overall, we think the actions taken since October of 2022 have been directionally positive for low-down payment borrowers. At this point, we are uncertain what impact these changes will have on our overall business. However, we are supportive of efforts to facilitate access to low-down payment lending for first-time low- to moderate-income homebuyers. We look forward to continuing to work with FHFA, the GSEs, and other industry key stakeholders to responsibly expand access to homeownership. As we look ahead into 2023, we do expect downward pressure on home prices to continue and further expect the overall market opportunity for new private mortgage insurance to be smaller compared to 2022. Even so, we remain encouraged by favorable demographics that suggest meaningful long-term MI opportunities. As we close out another record year, we have confidence in our transformed business model and believe that our strength and flexibility position us to continue to execute and deliver on our business strategies in 2023 and beyond to create value for all of our stakeholders. Lastly, we're often asked what differentiates us. First and foremost, it's our people. Our people have been the cornerstone of our accomplishments. Additionally, there's 65 years of industry thought leadership that we bring to the table. We listen, build partnerships, provide a superior customer experience, and deliver quality offerings and solutions to our customers so that together we can help borrowers overcome the largest obstacle of homeownership, the down payment. Our commitment and ability to help borrowers achieve the dream of affordable and sustainable homeownership has never been stronger. With that, operator, let's take questions.

And our first question comes from Mark DeVries from Barclays.

I had a question about how you're thinking about the alternative uses of your excess capital. One of your competitors announced an interesting acquisition this morning. I'm wondering what your latest thoughts are on using some of that capital to potentially diversify the business in ways that may either dampen some of the cyclicality of your earnings and/or be accretive to returns or the multiple?

Mark, it's Tim. I appreciate the question. It's something that we think about from an overall strategic standpoint. It's safe to say that on a routine basis, we consider alternative deployment of capital and whether it's diversification underneath. Quite frankly, we haven't seen opportunities that we think move the needle and that we think would be a benefit to the franchise and to our shareholders. That could change in the future, but to date, we have not really seen that.

Okay. Got it. And then just one question. Nathan, I heard your comment that guidance for the in-force portfolio yield to be relatively flat in 2023. What's the outlook for the net premium yield? Should that track that? Or is there still more pressure there?

Yes, Mark, I believe the net premium yield is influenced by several factors that are difficult to predict, such as accelerated single premiums. One point to highlight is that the ceded premium benefited this year from negative losses incurred, resulting in notably high profit commissions on those quota share deals. As loss levels stabilize to normal, definitely moving from negative to positive, this will affect the profit commission, which was quite high in 2022. Therefore, I think the ceded premium number is likely to rise slightly, and with a consistent in-force premium yield, this would result in a modest decrease in the net premium yield. However, we would also see benefits from the quota share reflected in the loss line.

And our next question comes from Bose George from KBW.

Your comments on market share raised a question. Is the decline you’re expecting due to your stricter underwriting, your pricing strategies, or a mix of both? A bit more detail on this would be helpful.

I appreciate the question, Bose. We can't predict exactly where we are at this time, but we have a good understanding that it's not just about market size. We believe we may have lost some market share, and I want to emphasize this even more as we approach our Q1 report. MiQ enables us to price more precisely and express our views on risk in the marketplace through pricing and various risk factors. It's a combination of these elements. When considering risk and return, I focus on how to reflect the premium necessary for the risk being undertaken.

Okay. Yes, that makes sense. And then you noted that you maintain higher liquidity at the holding company. I mean, is there a way for us to kind of size that? What does that mean just so we can kind of triangulate to potential capital return?

Yes, Bose, this is Nathan. What we were trying to highlight is that throughout 2022, we were quickly utilizing the large dividends we received, particularly for debt reduction. Currently, the holding company has a need for cash because our liquidity and leverage ratios are approaching our targets. We are continuing to repurchase shares in the fourth quarter and into January. We expect to exhaust our repurchase authorization, but our discussions with the Board regarding repurchase activity and dividends are ongoing. In April or during Q1 in our earnings report, we will be able to provide a better update on this, including the dividend from the operating company to the holding company alongside three more months of performance and macroeconomic insights, as well as our plans moving forward with repurchases.

And our next question comes from Mihir Bhatia from Bank of America.

I did want to ask about just delinquencies. Are we back to like just the normal cadence of delinquencies now just from regular way business, like nothing unusual going on there in terms of both delinquency notices coming in? And does that mean the delinquency rate drifts a little higher from here as we enter those peak years of losses that you mentioned? Just trying to understand expectations around the delinquency rate.

Yes, Mihir, it's Nathan. Thank you for your question. As I noted earlier, the number of new notices is still significantly lower than pre-COVID levels. We're quite satisfied with the credit performance, but we're not observing many direct COVID-related or unusual circumstance notices. It seems we are seeing more typical delinquencies that have occurred over time. Regarding trends, we anticipate that delinquencies may rise from the 2020 and 2021 cohorts as they move into their third and fourth years, which is usually when we see an uptick in delinquencies. The elevated delinquent inventory can also be attributed to the slow pace of paid claims. If the rate of paid claims and foreclosure activity increases, we could see resolutions for some long-standing delinquent notices, many of which we expect will eventually go to claim at a high rate, affecting the inventory size. Additionally, we typically saw more seasonal trends before COVID, but those have diminished. Historically, February, March, and April are strong months for credit. Although I can't guarantee a continued upward trend, we believe the situation will remain relatively stable with a slight increase, given that we've insured many more loans than pre-COVID, and these larger portfolios are now entering their peak notice years in 2023 and 2024.

Okay. And then maybe just going to expenses, if it's okay. For many, many years, MGIC was the market leader in terms of just having the lowest expense ratio in the industry. 2022, on the other hand, was quite different. Was there a little bit of a catch-up in 2022? And I guess the question is, like, I know you gave numbers for 2023, but I'm just talking about just more generally, is the expense philosophy a little different going forward? How are you thinking about that expense ratio? Just is there a target expense ratio you work towards? Just trying to understand your philosophy around expenses because there does seem to be a little bit of a change.

Yes. No, I appreciate the question, Mihir. I'll start, and Nathan can chime in if he wants to. I think it's safe to say that over the last couple of years, we felt it important to invest in the platform over the long run. Part of that is to make sure we invest in the actual technology platforms that are legacy, but a big part of it is investing in our data and analytical capabilities that we think are critical as the industry continues to evolve. As Nathan called out, the biggest headwind in Q4 was really related to the pension expense, and really that's coming from the discount rate moving up there as much as anything. So I think you should think about us as continuing to be very focused and disciplined on expenses. I think Nathan talked about where we think we'll be in '23. It's a reflection of us wanting to exercise discipline around expenses because we do believe that over the long run, within this industry, being good stewards of how you spend dollars is very important, although you have to do it. You have to invest in the platform to make sure that you can continue to progress and grow over the long run. So I wouldn't say a change in philosophy as much as the recognition that we have to invest to grow over the long run to be as competitive as we can in the marketplace, but we want to do that in a very thoughtful manner.

Got it. And then just my last question. Just within more and more mortgage companies offering higher interest rate buydowns and things like that, do you underwrite those differently? How do you think that some of those types of innovations will impact the credit performance longer term?

No, it's a good question, Mihir. I think the concern would be a return to what we've seen before. The good news is that for anything we underwrite, the buydowns are usually qualifying, assuming there is no buydown. This allows us to feel a certain level of comfort that there isn't undue risk in that loan. I always have some concerns about payment shock, for example. However, if they are underwritten with the assumption that there is no buydown, it goes a long way in ensuring that the borrower can not only purchase the home but also sustain it long-term. Overall, I feel generally comfortable about what's happening in that aspect of the market right now.

And our next question comes from Doug Harter from Credit Suisse.

Just one more on the market share outlook. Just wondering if there's anything that's kind of changed in your view that's leading to that, whether it's kind of your outlook on credit quality or your outlook on the competitive dynamics that kind of led to this happening in 4Q and into '23?

Yes. I think home prices are currently declining. We are all hopeful that unemployment does not rise significantly, but we are in a more challenging environment. We believe our premium rates should reflect this situation, and we are fine with losing some market share as a result. Ultimately, our priority is to ensure we achieve the right return to cover potential risks. MiQ provides us with excellent capabilities to manage this effectively and in real time. We feel very confident about it. As a company with strong customer relationships, we strive to secure as much business as possible, while also being disciplined in ensuring we receive an appropriate return on our capital investments.

And our next question comes from Geoffrey Dunn from Dowling.

I have a couple of questions. First, regarding your guidance on the core premium rate being stable for 2023, I noticed in your disclosure about the MRA charge on new risk that it was increasing over the past four quarters leading up to Q4. I would assume that there was a mix shift benefit to your premium rate contributing to that stability. However, this quarter, it appears to have decreased and may indicate tighter credit conditions. If that rate remains low, below 7%, should we anticipate that as it builds throughout the year, the core premium rate could decline again in 2024? How do the mix shift and MRA charge provide guidance for where the core rate might head?

Yes, Geoff, it's Nathan. I think you're calling out a really important factor there that the mix does matter a lot for the overall in-force premium yield. I think one factor that may cause it not to have as big of an impact next year is just that we don't expect that the market will be as large, so we won't be writing as much volume. But I think I would think about that guidance as kind of indexed to maybe the back half of 2022 business, so maybe somewhere in between the mix of business that we wrote in the third and fourth quarter, so something around that 7% level. So if we were writing business that was well below that or well above that. But I think even the third and fourth quarter is at 10, 20, 30 basis points on either side of that 7%, I think that's still kind of within the range that we'd be comfortable with that flat guidance.

Okay. And then I was wondering if it were possible to help simplify the impact on credit from the equity buildup in the portfolio. Obviously, a number of people, including myself, I think we're heading into some sort of recession type of scenario in which you would normally see notices go up, incidence assumptions go up, claim severity assumptions go up. If I painted in an environment where it was a 10% incidence assumption, but then you adjusted that for how much equity is built up in your existing book, is that something you can help frame up all of a sudden, if that 10% becomes 9.5% or 10% becomes 9% simply because of the benefits from the equity?

Geoff, I'll begin, Tim, and I may need to think a bit more about this question and might not have a precise answer. It's clear that we consider this topic. Overall, it's accurate to say that the mark-to-market loan-to-value ratios have been improving and are likely below 70% by year-end. Our perspective is that there has been significant home price appreciation for a substantial portion of our portfolio, particularly before interest rates began to rise. The latter half of 2022 comprises about 10% of our in-force business, and it appears that it lacks the same degree of embedded home price appreciation. Therefore, it seems we have two distinct groups of loans that could respond differently based on home price trends and unemployment rates. Fundamentally, in our industry, declines in home prices and unemployment issues can lead to losses. However, the built-in equity within our book plays a crucial role in helping to mitigate that impact. We are optimistic about the built-in equity across much of our business portfolio, as it significantly reduces the severity of potential claims and decreases the likelihood of incidents simply turning into claims, given that there are alternative solutions for homeowners who struggle to meet their mortgage payments.

Okay. And then just last question. Nathan, was the incident rate unchanged at 8% this quarter? And can you also provide your average new money yield?

Yes, there was no change in the new notice claim rate. And then I'm sorry, Geoff, the second part of the question, are you referring to the investment portfolio?

Yes. I'm sorry, new money yield on investments.

Yes. So in kind of the noncash portion of the portfolio, the core investment portfolio was more like 5.5%.

And our next question comes from Eric Hagen from BTIG.

Curious if you would say there's any meaningful catalyst away from lower mortgage rates, which could lead to lower persistency in the near term. Do you think we could get a nice pop in housing demand, especially from first-time buyers if mortgage rates fall even just a little bit?

Yes. From a persistency standpoint, we're currently at 80%. I believe the run rate is higher than that and could reach the low to mid-80s. Regarding refinancing, if rates decline, there aren't many loans that would fit the criteria for refinancing. There may be challenges to maintain that persistency, but I don't anticipate significant issues, especially in the very short term. We're mainly focusing on our portfolio for the latter half of the year, which accounts for about 10% of our overall in-force, and could see some activity if rates drop closer to 5%. However, there isn't much built-up equity at that stage. Overall, we are optimistic about the persistency of our portfolio going forward. Eric, could you remind me of the second part of your question?

Demand for housing, especially from first-time buyers on the back of lower mortgage rates.

Yes. I think as I said in the opening comments, demographics still remain strong over the long run. And we still think there's a lot of pent-up demand for first-time home buyers. I think when rates rose as quickly as they did, that has people stand by the sidelines, especially when you consider how much home prices went up, so affordability gets stretched. I think once you get past the sticker shock of the higher interest rate and you look back and say, okay, do I feel comfortable in my job? Do I have a life event? Is it the right time to purchase the home? That shock of the higher interest rates, which just gets closer to longer-term sort of historical norms becomes less of an issue. And to the extent that home prices have come down a little bit and certain markets make it more affordable, that combination looks strong. So again, I think over the long run, it's really attractive for first-time homebuyers, and ultimately that's a big chunk of our market. I think there is just a little bit of sticker shock with affordability with both the double whammy of home price appreciation and rates. But I think that moderates over time, quite frankly. Yes. It's a good question. We try to evaluate all the fee changes really combined, looking at what the GSEs did from October. It's safe to say that a good chunk of our book gets affected by it. I think you put it all together, I don't think we feel like there's a very material change in what ultimately might flow to MI versus other execution; some changes within the different categories, but it doesn't feel like it's dramatically expanded or narrowed the box of what would come to private MI.

Yes, Eric, it's Nathan. I mean most of our business is done at the 90 LTV and above. So I think when we think about risk layering, we think about it as combinations of the highest LTV; so say, 97 LTV with higher DTI or lower FICO or things like that. On some of those dimensions, if you look at above 45 DTI, for instance, and 97 LTV and below 680 FICO, the amount of business that we do that has, say, two of those factors is in the low single digits. I don't have it exactly in front of me, but maybe 3% or 4% of our new business is in that category. So not a lot of business, but if you include kind of 90 LTVs and up, that's most of what we do just given the space that we operate in.

And I am showing no further questions. I would now like to turn the call back over to Tim for closing remarks.

Thanks, Justin. I thank everyone for their interest in MGIC. I thank all of our coworkers for another phenomenal year. And being Groundhog Day, hope that Punxsutawney Phil sees only six more weeks of winter. Thanks, everyone.

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