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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
September 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 number1-10816
download.jpg
MGIC Investment Corporation
(Exact name of registrant as specified in its charter)
Wisconsin39-1486475
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
250 E. Kilbourn Avenue53202
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 classTrading SymbolName of each exchange on which registered
Common stockMTGNew 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 October 27, 2023, there were 277,311,432 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 - Q3 2023 | 2

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2023
Table of contents
Page
Consolidated Balance Sheets - September 30, 2023 (Unaudited) and December 31, 2022
Consolidated Statements of Operations (Unaudited) - Three and Nine Months Ended September 30, 2023 and 2022
Consolidated Statements of Comprehensive Income (Unaudited) - Three and Nine Months Ended September 30, 2023 and 2022
Consolidated Statements of Shareholders’ Equity (Unaudited) - Three and Nine Months Ended September 30, 2023 and 2022
Consolidated Statements of Cash Flows (Unaudited) - Three and Nine Months Ended September 30, 2023 and 2022
Item 2Unregistered Sales of Equity Securities and Use of Proceeds
MGIC Investment Corporation - Q3 2023 | 3

Glossary of terms and acronyms
/ A
ARMs
Adjustable rate mortgages

ABS
Asset-backed securities

Annual Persistency
The percentage of our insurance remaining in force from one year prior. As of September 30, 2023, we refined our methodology for calculating our Annual Persistency by excluding the amortization of the principal balance. All prior periods have been revised

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

MGIC Investment Corporation - Q3 2023 | 4

/ H
HAMP
Home Affordable Modification Program

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

MGIC Investment Corporation - Q3 2023 | 5

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

/ P
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

MGIC Investment Corporation - Q3 2023 | 6

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

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 - Q3 2023 | 7

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)NoteSeptember 30, 2023December 31, 2022
(Unaudited)
ASSETS
Investment portfolio: 7 / 8
Fixed income, available-for-sale, at fair value (amortized cost 2023 - $6,130,009; 2022 - $5,926,785)$5,581,537 $5,409,698 
Equity securities, at fair value (cost 2023 - $15,998; 2022 - $15,924)13,949 14,140 
Other invested assets, at cost850 850 
Total investment portfolio5,596,336 5,424,688 
Cash and cash equivalents266,543 327,384 
Restricted cash and cash equivalents8,582 5,529 
Accrued investment income58,499 55,178 
Reinsurance recoverable on loss reserves440,934 28,240 
Reinsurance recoverable on paid losses4265 18,081 
Premiums receivable57,606 58,000 
Home office and equipment, net39,379 41,419 
Deferred insurance policy acquisition costs15,905 19,062 
Deferred income taxes, net132,030 124,769 
Other assets115,600 111,443 
Total assets$6,331,679 $6,213,793 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Loss reserves$525,528 $557,988 
Unearned premiums165,093 195,289 
Senior notes642,828 641,724 
Convertible junior subordinated debentures— 21,086 
Other liabilities143,525 154,966 
Total liabilities1,476,974 1,571,053 
Contingencies
Shareholders’ equity:
Common stock (one dollar par value, shares authorized 1,000,000; shares issued 2023 - 371,353; 2022 - 371,353; shares outstanding 2023 - 279,475; 2022 - 293,433)
371,353 371,353 
Paid-in capital1,799,624 1,798,842 
Treasury stock at cost (shares 2023 - 91,878; 2022 - 77,920)
(1,260,422)(1,050,238)
Accumulated other comprehensive income (loss), net of tax (496,895)(481,511)
Retained earnings4,441,045 4,004,294 
Total shareholders’ equity4,854,705 4,642,740 
Total liabilities and shareholders’ equity$6,331,679 $6,213,793 
See accompanying notes to consolidated financial statements.
MGIC Investment Corporation - Q3 2023 | 8

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands, except per share data)Note2023202220232022
Revenues:
Premiums written:
Direct$280,885 $279,317 $828,211 $830,646 
Assumed3,770 2,205 9,538 6,291 
Ceded(50,164)(39,215)(141,842)(107,644)
Net premiums written234,491 242,307 695,907 729,293 
Decrease in unearned premiums, net6,786 9,804 30,196 33,755 
Net premiums earned241,277 252,111 726,103 763,048 
Investment income, net of expenses55,375 42,549 156,938 121,116 
Net gains (losses) on investments and other financial instruments
7/8
(695)(3,258)(13,380)(8,776)
Other revenue 548 1,397 1,484 5,143 
Total revenues296,505 292,799 871,145 880,531 
Losses and expenses:
Losses incurred, net(77)(105,054)(11,322)(223,426)
Amortization of deferred policy acquisition costs2,802 3,179 7,889 8,901 
Other underwriting and operating expenses, net50,130 58,475 174,191 166,656 
Loss on debt extinguishment— 11,632 — 40,130 
Interest expense9,254 10,300 28,005 38,673 
Total losses and expenses62,109 (21,468)198,763 30,934 
Income before tax234,396 314,267 672,382 849,597 
Provision for income tax51,552 64,642 143,937 175,691 
Net income$182,844 $249,625 $528,445 $673,906 
Earnings per share:
Basic$0.65 $0.82 $1.85 $2.18 
Diluted$0.64 $0.81 $1.83 $2.15 
Weighted average common shares outstanding - basic281,757 302,622 286,184 309,097 
Weighted average common shares outstanding - diluted285,600 307,194 289,924 315,029 

See accompanying notes to consolidated financial statements.

MGIC Investment Corporation - Q3 2023 | 9

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)Note2023202220232022
Net income$182,844 $249,625 $528,445 $673,906 
Other comprehensive income (loss), net of tax:
Change in unrealized investment gains and losses(75,221)(153,615)(24,796)(599,933)
Benefit plan adjustments3,213 (16,172)9,412 (15,289)
Other comprehensive income (loss), net of tax(72,008)(169,787)(15,384)(615,222)
Comprehensive income (loss)$110,836 $79,838 $513,061 $58,684 

See accompanying notes to consolidated financial statements.

MGIC Investment Corporation - Q3 2023 | 10

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)Note2023202220232022
Common stock
Balance, beginning and end of period$371,353 $371,353 $371,353 $371,353 
Paid-in capital
Balance, beginning of period1,799,444 1,791,380 1,798,842 1,794,906 
Reissuance of treasury stock, net under share-based compensation plans(80)(2,670)(16,992)(20,537)
Conversion of 9% Debentures, net of tax12(5,315)— (5,315)— 
Equity compensation5,575 3,333 23,089 17,674 
Balance, end of period1,799,624 1,792,043 1,799,624 1,792,043 
Treasury stock
Balance, beginning of period(1,192,783)(887,959)(1,050,238)(675,265)
Reissuance of treasury stock, net under share-based compensation plans33 1,400 9,746 10,579 
Repurchase of common stock(67,672)(84,311)(219,930)(306,184)
Balance, end of period(1,260,422)(970,870)(1,260,422)(970,870)
Accumulated other comprehensive income (loss)
Balance, beginning of period(424,887)(325,738)(481,511)119,697 
Other comprehensive income (loss), net of tax(72,008)(169,787)(15,384)(615,222)
Balance, end of period(496,895)(495,525)(496,895)(495,525)
Retained earnings
Balance, beginning of period4,291,135 3,623,983 4,004,294 3,250,691 
Net income182,844 249,625 528,445 673,906 
Cash dividends(32,934)(30,548)(91,694)(81,537)
Balance, end of period4,441,045 3,843,060 4,441,045 3,843,060 
Total shareholders’ equity$4,854,705 $4,540,061 $4,854,705 $4,540,061 

See accompanying notes to consolidated financial statements.



MGIC Investment Corporation - Q3 2023 | 11

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30,
(In thousands)20232022
Cash flows from operating activities:
Net income$528,445 $673,906 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization29,004 42,826 
Deferred tax expense (benefit)(3,172)1,900 
Equity compensation23,089 17,674 
Loss on debt extinguishment— 40,130 
Net (gains) losses on investments and other financial instruments13,380 8,776 
Change in certain assets and liabilities:
Accrued investment income(3,321)(965)
Reinsurance recoverable on loss reserves(12,694)20,521 
Reinsurance recoverable on paid losses17,816 36,061 
Premium receivable394 (1,114)
Deferred insurance policy acquisition costs3,157 1,696 
Profit commission receivable10,337 (1,497)
Loss reserves(32,460)(280,152)
Unearned premiums(30,196)(33,755)
Return premium accrual(5,900)(9,200)
Current income taxes(2,130)3,140 
Other, net(9,033)(36,154)
Net cash provided by (used in) operating activities526,716 483,793 
Cash flows from investing activities:
Purchases of investments(1,220,219)(544,224)
Proceeds from sales of investments294,202 391,394 
Proceeds from maturity of fixed income securities686,552 536,194 
Proceeds from sale of equipment 166 — 
Additions to property and equipment(1,455)(2,402)
Net cash provided by (used in) investing activities(240,754)380,962 
Cash flows from financing activities:
Conversion/purchase of 9% convertible junior debentures
(28,637)(88,908)
Redemption of 5.75% senior notes— (242,296)
Repayment of FHLB Advance— (155,000)
Cash portion of loss on debt extinguishment— (39,445)
Repurchase of common stock(216,693)(303,060)
Dividends paid(91,174)(81,288)
Payment of withholding taxes related to share-based compensation net share settlement(7,246)(9,958)
Net cash provided by (used in) financing activities(343,750)(919,955)
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents(57,788)(55,200)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period332,913 304,958 
Cash and cash equivalents and restricted cash and cash equivalents at end of period$275,125 $249,758 
See accompanying notes to consolidated financial statements.

MGIC Investment Corporation - Q3 2023 | 12

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 September 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.

Subsequent events
We have considered subsequent events through the date of this filing.



MGIC Investment Corporation - Q3 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 nine months ended September 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 September 30, 2023 and December 31, 2022 are presented in table 3.1 below.
Long-term debt obligations
Table
3.1
(In thousands)September 30, 2023December 31, 2022
5.25% Notes, due August 2028 (par value: $650 million)
$642,828 $641,724 
9% Debentures, due April 2063
— 21,086 
Long-term debt, carrying value$642,828 $662,810 

The 5.25% Senior Notes (5.25% Notes) is an obligation of our holding company, MGIC Investment Corporation.

2023 Transactions
In the third quarter of 2023, under the terms of our 9% Convertible Junior Subordinated Debentures (“9% Debentures”), we exercised our option to redeem the outstanding principal of $21.1 million. The 9% Debentures were convertible into shares of MGIC common stock at a rate of 77.9620 shares per $1,000 principal amount. Prior to the redemption date, substantially all holders elected to convert into shares of common stock. Under the terms of the 9% Debentures, we paid cash of $28.6 million in lieu of issuing shares of common stock. The conversion of our 9% Debentures resulted in a $5.3 million reduction in our shareholders’ equity, net of tax and a reduction of 1.6 million potentially dilutive shares.

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, including the conversion feature on the 9% Debentures. As of September 30, 2023 we are in compliance with our debt covenants.

Interest payments
Interest payments for the nine months ended September 30, 2023 and 2022 were $35.1 million and $52.7 million, respectively.

MGIC Investment Corporation - Q3 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 September 30,Nine Months Ended September 30,
(In thousands)2023202220232022
Premiums earned:
Direct$287,640 $289,072 $858,310 $864,191 
Assumed 3,801 2,254 9,635 6,501 
Ceded - quota share reinsurance (1)
(32,693)(19,348)(90,012)(56,721)
Ceded - excess-of-loss reinsurance(17,471)(19,867)(51,830)(50,923)
Total ceded(50,164)(39,215)(141,842)(107,644)
Net premiums earned$241,277 $252,111 $726,103 $763,048 
Losses incurred:
Direct$6,627 $(112,435)$2,044 $(242,861)
Assumed20 21 (7)(340)
Ceded - quota share reinsurance(6,724)7,360 (13,359)19,775 
Losses incurred, net$(77)$(105,054)$(11,322)$(223,426)
Other Reinsurance Impacts:
Profit commission on quota share reinsurance (1)
$30,698 $47,255 $97,218 $135,049 
Ceding commission on quota share reinsurance12,678 13,321 37,446 38,355 
(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
Table4.2
Quota Share ContractCovered Policy YearsQuota Share %
Annual Loss Ratio to Exhaust Profit Commission (1)
Contractual Termination Date
2020 QSR 202012.5 %62.0 %December 31, 2031
2020 QSR and 2021 QSR202017.5 %62.0 %December 31, 2032
2020 QSR and 2021 QSR202117.5 %61.9 %December 31, 2032
2021 QSR and 2022 QSR202112.5 %57.5 %December 31, 2032
2021 QSR and 2022 QSR202215.0 %57.5 %December 31, 2033
2022 QSR and 2023 QSR202215.0 %62.0 %December 31, 2033
2022 QSR and 2023 QSR202315.0 %62.0 %December 31, 2034
2023 QSR202310.0 %58.5 %December 31, 2034
Credit Union QSR 2020-202565.0 %50.0 %December 31, 2039
(1) We will receive a profit commission provided the annual loss ratio on policies covered under the transaction remains below this ratio.

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

MGIC Investment Corporation - Q3 2023 | 15


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
Table4.3
Quota Share ContractCovered Policy Years
Optional Termination Date (1)
Optional Quota Share % Reduction Date (2)
Optional Reduced Quota Share %
2020 QSR 2020December 31, 2023January 1, 202410.5% or 8%
2020 QSR and 2021 QSR2020December 31, 2023January 1, 202414.5% or 12%
2020 QSR and 2021 QSR2021December 31, 2023January 1, 202414.5% or 12%
2021 QSR and 2022 QSR2021December 31, 2023January 1, 202410.5% or 8%
2021 QSR and 2022 QSR2022December 31, 2024January 1, 202412.5% or 10%
2022 QSR and 2023 QSR2022December 31, 2024January 1, 202412.5% or 10%
2022 QSR and 2023 QSR2023December 31, 2025July 1, 202412.5% or 10%
2023 QSR2023December 31, 2025July 1, 20248% 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.
We have elected to terminate our 2020 QSR Transaction effective December 31, 2023 and will incur an early termination fee in the fourth quarter of approximately $5 million.

We agreed to terms on a 30% QSR Transaction with a group of unaffiliated reinsurers covering most of our new insurance written in 2024.

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 $40.9 million as of September 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 QSR Transactions described above has an insurer financial strength rating of A- or better (or a comparable rating) by Standard and Poor's Rating Services, A.M. Best, Moody's, or a combination of the three.

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

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 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 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.


MGIC Investment Corporation - Q3 2023 | 16

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.

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 September 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.

In October 2023, Home Re 2019-1 Ltd., Home Re 2021-1 Ltd., and Home Re 2021-2 Ltd conducted tender offers for certain tranches of the mortgage insurance-linked notes that supported the reinsurance agreements with MGIC. The tender offer resulted in the reduction in the insurance-linked notes of $187.1 million for the Home Re 2019-1 Ltd, $91.1 million for the Home Re 2021-1 Ltd., and $106.7 million for the Home Re 2021-2 Ltd. The reinsurance coverage corresponding to the tendered notes was terminated. MGIC will incur approximately $8 million of additional ceded premium in the fourth quarter associated with the cost of the tender premiums and associated expenses.

Also in October, 2023, MGIC entered into a $330.2 million excess-of-loss reinsurance agreement (executed through an insurance linked note transaction) that covers policies with inforce dates from June 1, 2022 through August 31, 2023.

Table 4.4a provides a summary of our XOL Transactions as of September 30, 2023.

Excess of Loss Reinsurance
Table 4.4a
($ in thousands)Issue DatePolicy In force DatesOptional Call Date (1)Legal MaturityInitial First Layer RetentionInitial Excess of Loss Reinsurance Coverage
2023 Traditional XOL (2)
April 1, 2023January 1, 2023 - December 29, 2023January 1, 203110 yearsTBDTBD
2022 Traditional XOLApril 1, 2022January 1, 2022 - December 30, 2022January 1, 203010 years$82,523$142,642
Home Re 2022-1, Ltd.April 26, 2022May 29, 2021 - December 31, 2021April 25, 202812.5 years325,589473,575
Home Re 2021-2, Ltd.August 3, 2021January 1, 2021 - May 28, 2021July 25, 202812.5 years190,159398,429
Home Re 2021-1, Ltd.February 2, 2021August 1, 2020 - December 31, 2020January 25, 202812.5 years211,159398,848
Home Re 2020-1, Ltd.October 29, 2020January 1, 2020 - July 31, 2020October 25, 202710 years275,283412,917
Home Re 2019-1, Ltd.May 25, 2019January 1, 2018 - March 31, 2019May 25, 202610 years185,730315,739
Home Re 2018-1, Ltd.October 30, 2018July 1, 2016 - December 31, 2017October 25, 202510 years168,691318,636
(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.

MGIC Investment Corporation - Q3 2023 | 17

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 September 30, 2023 and December 31, 2022.
Table 4.4bRemaining First Layer RetentionRemaining Excess of Loss Reinsurance Coverage
($ in thousands)
September 30, 2023
December 31, 2022
September 30, 2023
December 31, 2022
2022 Traditional XOL$82,463 $82,517 $142,642 $142,642 
Home Re 2022-1, Ltd.325,104 325,576 445,461 473,575 
Home Re 2021-2, Ltd.189,610 190,097 281,919 352,084 
Home Re 2021-1, Ltd.210,858 211,102 209,311 277,053 
Home Re 2020-1, Ltd.274,968 275,051 53,023 113,247 
Home Re 2019-1, Ltd.182,791 183,540 208,146 208,146 
Home Re 2018-1, Ltd.164,385 164,849 84,819 140,993 

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 September 30, 2023 and December 31, 2022, were not material to our consolidated balance sheet and the changes in fair value during the three and nine months ended September 30, 2023 and September 30, 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 September 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.


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Table 4.5 presents the total assets of the Home Re Entities as of September 30, 2023 and December 31, 2022.
Home Re total assets
Table4.5
(In thousands)Total VIE Assets
Home Re Entity
September 30, 2023
December 31, 2022
Home Re 2022-1 Ltd.$454,943 $473,575 
Home Re 2021-2 Ltd.282,328 357,340 
Home Re 2021-1 Ltd.209,384 285,039 
Home Re 2020-1 Ltd.58,371 119,159 
Home Re 2019-1 Ltd.208,146 208,146 
Home Re 2018-1 Ltd.89,405 146,822 

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”.)






















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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.














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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. In the third quarter of 2023, under the terms of our 9% Debentures, we exercised our option to redeem the outstanding principal. (See Note 3 - “Debt”.)

Table 6.1 reconciles the numerators and denominators used to calculate basic and diluted EPS.
Earnings per share
Table
6.1
 Three Months Ended September 30,Nine Months Ended September 30,
(In thousands, except per share data)2023202220232022
Basic earnings per share:
Net income$182,844 $249,625 $528,445 $673,906 
Weighted average common shares outstanding - basic281,757 302,622 286,184 309,097 
Basic earnings per share$0.65 $0.82 $1.85 $2.18 
Diluted earnings per share:
Net income$182,844 $249,625 $528,445 $673,906 
Interest expense, net of tax (1):
9% Debentures276 620 1,025 2,851 
Diluted income available to common shareholders$183,120 $250,245 $529,470 $676,757 
Weighted average common shares outstanding - basic281,757 302,622 286,184 309,097 
Effect of dilutive securities:
Unvested RSUs2,624 1,902 2,239 1,848 
9% Debentures1,219 2,670 1,501 4,084 
Weighted average common shares outstanding - diluted285,600 307,194 289,924 315,029 
Diluted earnings per share$0.64 $0.81 $1.83 $2.15 
(1) Interest expense has been tax effected at a rate of 21%.

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Note 7. Investments
Fixed income securities
Our fixed income securities classified as available-for-sale at September 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 September 30, 2023
Table7.1a
(In thousands)Amortized CostGross Unrealized GainsGross Unrealized (Losses)Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies$220,592 $7 $(9,765)$210,834 
Obligations of U.S. states and political subdivisions2,178,573 1,234 (274,157)1,905,650 
Corporate debt securities2,564,817 498 (200,650)2,364,665 
ABS172,262 9 (5,051)167,220 
RMBS307,402 7 (34,727)272,682 
CMBS297,091 65 (22,836)274,320 
CLOs333,974 9 (2,256)331,727 
Foreign government debt4,486 — (859)3,627 
Commercial paper50,812 — — 50,812 
Total fixed income securities (1)
$6,130,009 $1,829 $(550,301)$5,581,537 
Details of fixed income securities by category as of December 31, 2022
Table7.1b
(In thousands)Amortized CostGross Unrealized GainsGross 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 subdivisions2,400,261 4,866 (256,073)2,149,054 
Corporate debt securities2,416,475 1,043 (196,377)2,221,141 
ABS126,723 5 (6,041)120,687 
RMBS223,743 10 (25,744)198,009 
CMBS257,785 22 (20,591)237,216 
CLOs337,656 5 (7,829)329,832 
Foreign government debt4,486 — (699)3,787 
Commercial paper14,075 — (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 $177.4 million and $67.0 million at September 30, 2023 and December 31, 2022, respectively.

We had $11.5 million and $11.8 million of investments at fair value on deposit with various states as of September 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 $143.8 million and $128.4 million at September 30, 2023 and December 31, 2022, respectively.


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The amortized cost and fair values of fixed income securities at September 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
Table7.2
September 30, 2023
(In thousands)Amortized costFair Value
Due in one year or less$667,446 $659,512 
Due after one year through five years1,543,417 1,458,444 
Due after five years through ten years1,805,365 1,617,227 
Due after ten years1,003,052 800,405 
5,019,280 4,535,588 
ABS172,262 167,220 
RMBS307,402 272,682 
CMBS297,091 274,320 
CLOs333,974 331,727 
Total$6,130,009 $5,581,537 

Equity securities
The cost and fair value of investments in equity securities at September 30, 2023 and December 31, 2022 are shown in tables 7.3a and 7.3b below.
Details of equity security investments as of September 30, 2023
Table7.3a
(In thousands)CostGross GainsGross LossesFair Value
Equity securities$15,998 $— $(2,049)$13,949 
Details of equity security investments as of December 31, 2022
Table7.3b
(In thousands)CostGross GainsGross LossesFair 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
Table7.4Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2023202220232022
Fixed income securities
Gains on sales2,581 1,667 2,747 6,788 
Losses on sales(2,814)(7,040)(13,362)(12,790)
Impairments— (1,415)— (1,415)
Equity securities gains (losses)
Market adjustment(462)(617)(266)(2,351)
Change in embedded derivative on Home Re Transactions
(7)4,199 (2,486)983 
Other
Gains (losses) on sales(4)(66)(4)(18)
Market adjustment11 14 (9)27 
Net gains (losses) on investments and other financial instruments(695)(3,258)(13,380)(8,776)
Proceeds from sales of fixed income securities24,434 125,186 293,392 388,740 

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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 September 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 September 30, 2023
Table7.5a
Less Than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies$64,850 $(538)$111,833 $(9,227)$176,683 $(9,765)
Obligations of U.S. states and political subdivisions674,000 (14,743)1,226,433 (259,414)1,900,433 (274,157)
Corporate debt securities600,174 (12,938)1,745,339 (187,712)2,345,513 (200,650)
ABS74,002 (950)92,013 (4,101)166,015 (5,051)
RMBS116,145 (6,082)172,590 (28,645)288,735 (34,727)
CMBS33,176 (2,433)241,908 (20,403)275,084 (22,836)
CLOs— — 320,534 (2,256)320,534 (2,256)
Foreign government debt— — 3,627