So, we have had periods, post-COVID where we didn’t pay dividends for about 1.5 years from MGIC to the holding company because it felt like the right thing to do was to retain that capital at MGIC because of the increased uncertainty in the environment there. So, as long as we still feel like we have capital above our target levels at MGIC that will fund dividends to the HoldCo. And as Tim said, with our debt to capital at our target range right now, the primary purpose of the holding company money above our target levels there for liquidity and kind of risk purposes is really to return.
Eric Hagen: Yes. That’s all really helpful. Thank you, guys.
Nathan Colson: Thank you.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Mihir Bhatia from Bank of America.
Mihir Bhatia: Hey. Good morning. Thank you for taking my question. The first question I had was just on the NIW outlook. I think you mentioned a similar sized NIW market in 2024 and ‘23? Like is that for MTG in particular or was that industry or both, I guess?
Tim Mattke: So, I think we are talking mostly about sort of MI originations overall. I think we would expect that the size of the overall origination market totally and then you think about penetration of those that are insured and then private mortgage insurance, but that’s probably pretty similar this coming year in ‘24 to what it was in ‘23.
Mihir Bhatia: So, I guess I am a little curious about that. Like, we look at industry forecasts, they generally have originations up, including purchase originations up a little bit year-over-year, but you also have some refi coming back. And I guess I am curious as to why you think, like why wouldn’t the NIW, and particularly, if we get rate cuts as everyone seems to expect now, like, will the penetration go down? Is there something about the market that’s making you feel like MI penetration is going down, because I would have thought it would be going up given affordability challenges, but I mean you tell me?
Tim Mattke: Yes. Obviously, when you think about mix and purchase and refi, if we get a little bit more refi at the back half of the year, we don’t expect that’s really going to help, it’s probably going to hurt the penetration rate, right. There would be more overall originations. But I think ultimately, it hurts the penetration for us. So, I don’t think there is a lot of pickup from MI origination of refi in the back half of this year, just what would be available to refi and what would ultimately refi. Again, I wouldn’t paint as a negative view of this year. I think we just think the ‘24 is shaping up to look pretty similar to ‘23 overall. Hopefully, there is upside to that. But I think overall, I think that’s sort of our view.
From our perspective, we were a little bit lower on share on average during the course of ‘23 than we have been historically. So, I think we might pick up a little bit there if the returns are appropriate. But from an overall MI origination standpoint, we think that’s relatively flat.
Mihir Bhatia: Got it. Thank you. And then just switching gears a little bit maybe to the returns point, right? You had a 15% ROE this quarter for a pretty similar last quarter too. And I was wondering, is this as good as it gets? I mean you are guiding to losses going up – sorry, not losses, but delinquency notices going up, which will obviously have an effect on provisions. And presumably, you don’t assume reserve releases in the future, that would suggest ROE would go down prospectively. And I was curious, I did want to get your thoughts on that, is like the MI business, a low double-digit ROE business from here? Is that like kind of your view, or do you have any comments there?
Tim Mattke: Yes. I think it’s a really valid question, right, because we benefited from exceptional credit quality, both in the terms of low new notices as well as a good amount of reserve releases, as Nathan talked in detail about some of those. And I think we have been saying for actually a number of years that credit is as good as it can get to a large extent, right. And so if you think about normalized through the cycle, and how we price the business and think about it, we price assuming that losses are higher than what we have been experiencing, and that’s going to continue to be our view on it. So, I think there has been a tremendous amount of tailwinds from a credit standpoint. We have continued to be wrong as far as that credit could get a little bit worse.
And when we say get a little bit worse, we still view it as likely better than what people think sort of historical averages are. So, still feel really good about the credit box. But again, I think we just – we want to be cautious about how good it’s been from a credit standpoint versus what we would view as still a really good credit quality market that would show some losses in it, right. It’s not usual to have negative incurred losses, quite frankly. With that, I think again, we talked a little bit at the beginning as far as originations. We think from a premium standpoint, we said relatively flat as far as the average premium this year. So, I think there is a little challenge from an ROE this next year if you don’t have the same level of reserve releases, which is quite frankly, difficult when you have less raw material in the loss reserves.
