MGIC Investment Corp. (MTG)’s Fourth Quarter 2014 Earnings Call Trasncript

Q: Great and Curt let me also wish you well on your retirement it’s been a pleasure over the years.

Curt S. Culver – Chairman and CEO
Thank you Mark. I have enjoyed working with you. Thanks.

Q: Thanks.

Operator
Our next question comes from Jack Micenko with SIG. Your line is open.

Q: Hi, good morning. Let me ask Mark’s question in a different way. Curt you had given some historical context around where the FHA fees have been in the late 90s early 2000s knowing that the GSEs or the FHFA rather ramped up LLPAs under the crisis. Can you give us sort of a historical context where LLPAs were back in the earlier part of the 2000s, just sense of magnitude on where we can go?

Curt S. Culver – Chairman and CEO
They weren’t there.

Q: None, zero?

Curt S. Culver – Chairman and CEO
Zero.

Q: Okay great. And then the underwriting ratio…

Curt S. Culver – Chairman and CEO
Jack, just to be clear, there was a guarantee fee being charged. But there was no adverse market charge and there was no, for a mainstream product, there was no add-on fees.

Q: Okay. So the 275 at one point it’s a really heavy lower FICO, those were still zero the G fee was there still but nothing on top of that. Okay, perfect. And then underwriting ratio’s come down pretty nicely in the last six quarters. How much operating leverage do you think you have in the model? How much business can you write with the expense base you have? I mean, does that number move materially further down from the ‘13 and change level we saw this quarter?

Timothy J. Mattke – EVP and CFO
Yeah. So I think you are referencing the underwriting expense ratio. What I would say is it’s probably gotten about its lowest point. Keep in mind that the ceding commission is taking that ratio down. So that’s had an impact of probably 3 or 4 percentage points on the ratio and then as we have been very diligent obviously to the financial prices on expenses and have continued to be so, but I think it’s safe to say that even excluding the ceding commission that we’d probably reach sort of a low point from an expense standpoint, not that you are going to see a large jump in the ratio separate from the ceding commission. So we think we can still scale a lot off of where we are with expenses, but there will just be some upward pressure on expenses going forward.

Q: Okay, great. One last question, Curt you have been running the business for very long time, energy prices, taxes is a fairly big market for you although you get an energy relief I guess across the broader footprint from higher level borrowers. How do we think about that? Is there a qualitative component to loss incurred that’s either favorably or unfavorably adjusted, just some historical perspective there maybe?