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Tim Mattke

Thank you, Diana, and good morning, everyone. We are very pleased with our third quarter financial results, which continue to demonstrate the strength of our business model in response to changing market conditions. Our disciplined approach to risk management and prudent capital management strategies, together with our leadership in the market and focus on serving our customers with quality offerings and best in class service, continue to drive value for our stakeholders. Let's get started with a few financial highlights. In the quarter, we earned net income of $200 million and generated an annualized return on equity of 15.6%. Insurance In Force ended the quarter at $293 billion, up slightly quarter over quarter with annual persistency and in the quarter at 85%, flat compared to the lab last quarter.
We wrote 17.2 billion of new insurance in the quarter, up 27% from the prior quarter. Underwriting standards remain high, and we are focused on maintaining a strong and balanced insurance portfolio. We continue to be pleased with our credit quality and performance of our portfolio, and our financial results have benefited from the favorable credit performance we have been experiencing. Turning to our capital activities. The strength and flexibility of our capital position in the quarter supported the repurchase of 5.2 million shares of common stock for $123 million in the payment of a quarterly common stock dividend of $34 million. Combined, these represented 79% payout ratio of the quarter's net income. In addition, in October, we repurchased an additional 2.9 million shares of common stock for a total of $72 million. When determining our repurchase activity. We consider and evaluate a variety of internal and external factors and metrics, including share price through purchase activity I just discussed was reflective of continued strong credit performance and financial results and also higher market valuation levels. And we have experienced in recent years, we expect share repurchases will remain our primary means of returning capital to shareholders. As previously announced, the Board authorized the $0.13 per share quarterly common stock dividend payable on November 21st and last week, MGIC pay the $400 million dividend to the holding company, the dividend from MGIC to the holding company, reflecting capital levels at MGIC that continue to be above our target.
Our approach to capital management continues to be dynamic and maintaining both financial strength and flexibility are the cornerstones of our strategy. This approach enables us to position ourselves to achieve our objectives in various macroeconomic environments and it serves our stakeholders as well, MGIC's capital structure includes 6 billion of [PMIERs] available assets are well established. Reinsurance program remains integral to our risk and capital management strategies. In addition, reducing the volatility of losses and stress scenarios. Our reinsurance agreements, provide diversification and flexibility to our sources of capital and attract costs and reduced our PMIERs required assets by $2.2 billion or 40% at the end of the third quarter. PMIRs, operational and risk based capital requirements provide a strong foundation to serve low downpayment borrowers while protecting the GSE and taxpayers from under mortgage credit risk. In August, the GSEs issued updates to the risk base requirements related to the calculation of available assets, which will be implemented over a 24-month phase in period with a fully effective date of September 30th, 2026. We don't expect these updates, we'll have a material impact on MGIC's available assets for our investment strategy.
Turning more broadly to the market conditions. The housing market remains constrained by limited supply of homes for sale and affordability challenges compounded by higher mortgage rates. However, there may be signs of easing. The recent Fed interest rate cut and generally lower mortgage rates in the third quarter led to the 1st year over year increase in mortgage applications and three three years. In addition, the rate of home price appreciation continues to slow from the highs we saw in 2022 in the inventory of homes for sales, increasing pent-up demand for homeownership and demographics suggesting that the millennial and Gen Z populations will continue to add to housing demand or reasons to be optimistic about the resiliency of our business. Lastly, I'm happy to report in September and that has upgraded MGIC's financial strength and credit ratings to A. from A. minus and revised the outlook to the credit rating sustainable and aimed as stated, the ratings reflect MGIC balance sheet strength, which aimed at Best assesses the strongest as well as MGIC's operating performance and robust and surprise risk management framework. With that, let me turn it over to Nathan to get into more details on financial results for the quarter.

Nathan Colson

Thanks, Tim, and good morning. As Tim mentioned, we had another quarter with excellent financial results. We earned net income and adjusted net operating income of $0.77 per diluted share compared to $0.64 per diluted share last year. A detailed reconciliation of GAAP net income to adjusted net operating income can be found in our earnings release strong credit performance. We continue to experience again leading to a negative loss ratio this quarter. Re-estimation of ultimate losses on prior delinquencies resulted in $66 million of favorable loss reserve development in the quarter. The favorable development this quarter primarily came from delinquency notices we received in 2022 and 2023. Cure rates on those delinquency notices continue to exceed our expectations and therefore, we have made favorable adjustments to our ultimate loss expectations. In the third quarter, our account base delinquency rate increased 15 basis points to 2.24%, which is consistent with the seasonal trends we discussed last quarter and below the pre-pandemic 2.78% delinquency rate seen at the end of the third quarter of 2019. We expect that the delinquency rate will increase modestly due to seasonality in the fourth quarter before considering any impacts from Hurricane Selene and Milton, the in-force premium yield was 38.9 basis points in the quarter compared to 38.4 basis points last quarter. The increase in the quarter was due in part to updating our method for estimating the current mortgage amount of our in-force loans, which resulted in lower insurance in force and a 0.2 basis point increase in our in-force premium yield for the quarter. We continue to expect the in-force premium yield will remain relatively flat for the year. The book yield on the investment portfolio was 3.8% from a year ago and a marginal increase quarter over quarter as the yield on cash and cash equivalents declined offsetting improvements from reinvestment. Net investment income was $62 million in the quarter of $1 million sequentially and up $7 million in the third quarter last year. During the third quarter, the reinvestment rates in our fixed income portfolio continued to be above the book yield. We expect to book yield to continue to increase, but at a slower rate, green investment rates are facing downward pressure with the expectation of more rate cuts through the end of next year. In addition, the Fed's 50 basis point rate cut in September and significant declines in yields across the treasury curve, cost fixed income prices to rise resulting in the unrealized loss position on our investment portfolio, improving by $163 million in the quarter. The increase in investment income has continued to benefit total revenue, which was $307 million in the quarter compared to $305 million last quarter and $297 million in the third quarter last year. We remain focused on operational efficiency and expense management. Operating expenses in the quarter were $53 million, down from $55 million last quarter and flat with the third quarter last year. We expect the full year operating expenses will be in the range we provided throughout the year of $215 million to $225 million. Our operating results, together with our strong balance sheet, enabled us to grow book value per share to $20.66, up 19% compared to a year ago, while returning $625 million of capital to shareholders through dividends and share repurchases and reducing outstanding shares by 8%.
As Tim discussed, our well-established reinsurance program, which includes the use of forward commitment, quota share agreements and excess of loss agreements executed in either the traditional or Island market, is a key component of our capital management strategy. These agreements reduce the volatility of losses and adverse macroeconomic environments and provide diversification and flexibility to our sources of capital. Our overall reinsurance strategy is to prioritize coverage on the most recent butcher vintages and [future NIW] and to recapture risk on seasoned book. Here vintages is this the reinsurance no longer offers enough tail risk protection and stress scenarios. Quota Share Reinsurance is the foundation of our program as we value the forward commitment and certainty of coverage and have been consistent quota share buyers for more than a decade. In October, we further bolstered our reinsurance program with a multi-year 40% quota share agreement with a panel of highly rated reinsurers that will cover most of our policies written in 2025 and 2026. We also elected to cancel the quota share treaties covering our 2021 NIW effective December 31st, 2024. Both of these actions are consistent with our reinsurance strategy and follow the same approach we have taken in recent years to managing our overall risk and capital positions. one further comment before turning it back over to Tim.
At quarter end, MGIC's available assets exceeded PMIERs required assets by $2.5 billion for PMIERs excess level will fluctuate with the timing of dividend payments and reinsurance transactions. And we expect to $400 million dividend from MGIC holding company and the cancellation of the 2021 quatre share will result in a decrease in our PMIERs excess level at year end. And with that, let me turn it back over to Tim.

Tim Mattke

Thanks, Nathan. In closing, we continue to successfully execute our business strategies and deliver meaningful return on equity and steps are as demonstrated by our third-quarter results. While some uncertainties persist, housing fundamentals and underwriting standards remain solid in the near term, economic outlook is generally positive. We are confident in our leadership position in the market to remain committed to delivering best in class solutions and service to our customers and creating long-term value for our stakeholders. With that, Gerald, let's say questions.

Question and Answer Session

Operator

Thank you. At this time we will conduct a question and answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again and please stand by while we compile our Q&A roster.
Our first question comes from Terry Ma from Barclays. The floor is yours.

Terry Ma

Hey, thank you. Good morning. Maybe just a housekeeping question to start off with, was there a change to how you guys kind of report static pool delinquency curves? Look at slide 12 in your deck, the curves you put out the vintage curves you put out this quarter. Look kind of different into once you put out in this slide last quarter,

Tim Mattke

Terry, as Nathan, I we did the update just how frequently the data points behind those curves are. So previously we were really reporting as on a full year, like an annual basis and now we're doing at each of the data points on the curve as each quarter. So the full year amounts are there same, but there's more data points of the curve might look a little bit different there.

Terry Ma

Got it. Okay. And then maybe any color you're seeing on just performance of the 2022 and 2023 vintages. Are the kind of mentioned that the cure rates are coming in better than your expectations? Maybe you could just talk about entry into default. It looks like you noted 22 and 23 curves are kind of performing worse than 21. The ones who was the kind of look forward and those season more, should we kind of expect the total default rate to kind of start exceeding the kind of pre-pandemic levels? Thank you.

Tim Mattke

Curious anything yet [emanate], I certainly think over time that's possible. I mean, excluding potentially in the impact from the hurricanes that I don't think that's likely to happen in the near term. I mean, like we said in the prepared remarks of seasonally, our business has typically we've seen increases in the delinquent the rate in the back half of the year and then decreases in that rate certainly in the first quarter and oftentimes in the first half of the year. And we saw that last year for delinquency rate increase of 16 or 17 basis points in the first half of the year. I'm sorry of and that's right. And then decreased in the or sorry, rather increase in the second half of the year? We saw the same decrease in the first half of this year. The increase in Q3 or 15 basis points versus I think it was 10 basis points in the third quarter last year. Was in line with what we expect as you can see on those delinquency curves. I do think for 2022, Ventiv's looks like it is performing now kind of marginally worse from a new delinquency perspective. And then the other books surrounded either 21 or 23. But these are still very, very good levels. And the other thing that we track is looking at how different cohorts are curing, what is the cumulative cure rates at various points in time. And if we look at that by vintage, we really don't see much difference right now. So bought something that will continue to monitor. And if there is some thing of note to report, we certainly will I think right now. Well, I think that all the books vintages are performing quite well, both from a new delinquency perspective and once loans are delinquent power, that curing, I think the kind of cumulative cure rates continue to be quite strong, which again, has led to significant favorable development for us this quarter.

Operator

Got it. Thank you. one, please.
Our next question comes from the line of Bose George from KBW. The floor is yours.

Bose George

Good morning. In your new insurance written grew far more meaningfully than the couple of other companies have reported so far. Does that really just noise or anything different in terms of how you're positioning this quarter?

Tim Mattke

Bose, I think we think that the market overall probably grew a little bit. But I think it's also fair to say that we think we probably grew some market share this quarter and last quarter alluded to with our broad customer base, which we think is sort of the broad the industry that for a price neutral with the market and the risk based pricing world, we're going to end up with sort of higher market share overall. And ultimately, we're focused more on the long term of versus quarter over quarter market share more on what sort of returns can we get for the capital we deployed. But I think it's fair to say we probably grew some market share this quarter, probably more in line with the US being probably more and more in line on price in the risk base around that. We were especially say, first quarter this year.

Bose George

Okay, thanks. And then going back to credit, what's what was the mark to market loan to value on the 22- 23 vintage delinquencies compared to some of the older stuff?

Tim Mattke

Yes, both stays. And we have been some we haven't talked about as much about the mark to market, Dan, various cohorts, especially on delinquent loans, just because our view is still well, we see similar numbers. So what you'll see more broadly reported from the situations that were most concerned about are the situations that aren't experiencing average home price appreciation. So certainly, the 2021 and prior vintages have experienced on a on a kind of a pro forma basis us a tremendous amount of home price appreciation. I'm a little bit less for the 22 vintage and then for 23 and 24, partly due to home price appreciation being more modest. But but maybe most importantly, just those are such recent vintages, you're not as much on those, but even in rising home price environments where the average mark to market is quite low, we still see losses. We still see claim events. So I think it matters from a maybe stress testing and overall book position, how we feel about capital. But I think tried to emphasize that a little bit low. Yes, on delinquent loans.

Bose George

Okay, great. Thank you. Thank you.

Operator

Thank you for your questions. Our next question comes from Mihir Bhatia from Bank of America. A floor is yours.

Mihir Bhatia

Hey, good morning and thank you for taking my question. Maybe I'll just start with the premium rate and the Canadian market share gain this quarter looks like a premium rates stabilize. Do I think the direct premium rate actually kick the? Can you comment on what drove that? Was the pricing actions you took just more a function of portfolio to a lower also maybe just take the opportunity to comment on pricing and become competitive environment. What are you seeing right now?

Tim Mattke

Yes, I can start here and then [Nathwani China], anything that, you know, I think when you look at the average premium rate on the portfolio, right, it's not just what you're bringing on. It's also what's falling off on. And so I think it's while while we're happy that it moved up a little bit this quarter. I think as Nathan said, in prepared foods, March, we view that as relatively stable, which we thought it would be over the course of the year. Tom, from a competitive dynamic standpoint, again, it's the competitive market. I think I think it is good that the average premium rate is staying relatively stable. And I think as I alluded to and my last response on for Bose, we're priced sort of more on par with where the market and the risk base world. We're probably going to get a little bit outsized share. That's not the net set a goal we have by itself, but it is something that sort of more of an output. I think early this year, we probably were a little bit off, but the reality is pricing sort of goes up and goes down in different spots, right? We make adjustments on a regular basis, depending upon different risk factors. And so it's tough to say pricing's up or down specifically because we're making adjustments that are sometimes up sometimes winds down. And that could mean the difference between sort of winning business are not in some regards and for other customers that doesn't make as much of a different sell on. Again, I think it's been something that we've been very comfortable with sort of the capital being able to deploy. We're getting really solid returns on that business. And that's been true for a long time now.

Nathan Colson

Okay. Maybe just starting to persistencies. Can you just talk about your expectations on persistency in U.S.? Particularly curious if you saw any change in Q3? We had a little bit of a blip with rates coming, though. Did you see persistency pick low and that happened, but just any comments on persistency, maybe talk about the LTV on yield and maybe the note on your portfolio for any additional stats you can give us. Thank you.

Tim Mattke

Yes, I hear it's Nathan. I think persistency for us in this cycle has we think it's probably peaked, did close to 86% of the decline is saying or more tens of percentage points. So I mean down into the kind of low 80 fives now, if rates do decline like we saw for maybe 30 or 45 days there, because that will certainly pressure persistency. But I think on the quarter of tens of basis or tens of percentage points are a couple of percentage points, not the level that we saw in certainly in 2021, 2022. And a lot of that has to do with like you're calling out. The nature of the book that we have now is still a significant portion of the book is 4%, rates and below. And really, it's only the business that we've written over the last, say, 18 to 24 months that would that would be kind of in the money or even close to it if rates were down 50 or 75 or 100 basis points from here. So I don't I don't know that in any of our supplemental materials, we have no rate by vintage or things like that. But that's certainly, I think, a good add and something that we can provide additional information on. But your largest books continue to be was 2020, 21, 2022 vintages. And you've written at very low note rates. So we expect those to have high persistency for some time, even if rates were to come down pretty significantly from current levels.

Mihir Bhatia

Got it. And then just my last question, but just the expense outlook for the you have any update that looks like you're coming in below, I guess that some additional expenses related to the reinsurance. Dave, you mentioned 50 liter mission, but just anything you can comment on expense outlook?

Tim Mattke

Yes. I didn't mean to say that again, I think just to clarify on the reinsurance, the termination fee will run through the ceded premium line, not of the expense line for Q and AFI. right that we said in the prepared remarks that we expected expenses is this still be in the range that we initially gave in January and have kind of given consistently now throughout the year of $215million to $225 million. So I think feel good about the actions that we've taken to be in a in a good spot going into 2025 and beyond. We'll have the expectation is that we'll update guidance for 2025 expenses at our Q4 call of, but directionally expect expenses to be lower in 2025 to 2024

Mihir Bhatia

Thank you.

Operator

Thank you for your questions.
Our next question comes from the line of Geoffrey Dunn from Dowling & Partners. The floor is yours.

Geoffrey M. Dunn

Thank you. Good morning. Can you comment on the profit commission threshold for the new QSR?

Tim Mattke

Yes, Jeff, it's so it's one of the book years is 63% of the other is 62%. So good. What kind of a small change or I'm sorry, go ahead on integrated.

Geoffrey M. Dunn

I was going to say what was the process of going 40% out of the gate in the past, you guys have typically now come out at 20%, then added 20% a year later or something like that. Why the change in process here?

Tim Mattke

Yes, it's really a reaction to the market. Our approach has always been what is the reinsurance market telling us they want where's the capacity, whereas the right execution for us, our preference has always been to do longer forward term commitments. Our first quarter share deal covered almost three years. The one that we did in 2013 over time, the capacity to go out more than one year got narrower. So we shifted to doing some on a two-year basis somewhat of a one-year basis. I would say the kind of demand and capacity in the space right now in the reinsurance market is quite attractive from our perspective. So that's hence the upsizing a little bit from what we've done recently as a 30% quota share level. So the 40% level and then felt like we got what is very, very attractive pricing, good cost of capital for us. And most importantly, just no having that capital commitment and kind of risk management overlay for the next two years of NIW in our business is something that we always value. But if the market doesn't have enough capacity for that multiyear, we've found other ways to transact. But I think very, very happy with the execution that we have here right now. And I think it's it's estimates of the reinsurance market in this space getting broader, but also performance in this space has been quite good for some time. And you had similar to the primary market share. It's not growing as much as it was. The reinsurance market for mortgage credit risk isn't growing as much as it was a couple of years ago, which is, I think, help thing with demand as well. So our preference, like I said, is the place on a forward basis, multiyear. And this is really the market telling us that there's capacity at attractive pricing for us to really accomplish our multiyear goals right now.

Geoffrey M. Dunn

That sounds good. I appreciate the comments.

Operator

Thanks, Geoffery. Thank you for your question. Less cash on. Our last question comes from Scott Heleniak from RBC Capital Markets. A floor is yours.

Scott Heleniak

Yes, thanks. Good morning. Just wondering if you could I know I know it's early still, but could you touch on any impact you think the hurricanes might have on delinquencies in the fourth quarter, maybe the first quarter next year? Are you seeing any impact yet? And would you anticipate seeing very high cure rates like we have in past storms? Any anything you can share on kind of what you're thinking about that at this point?

Tim Mattke

Yes, Heleniak. And it is really again, we normally for us, it's got to be two months delinquent before we'd sort of see it come through. And so really haven't seen anything yet. And we would expect to see from some activity in the fourth quarter result. But as you alluded to for us, we've had these horrible events like [hurricanes happened historically], they've had higher cure rate in our average delinquency, significantly higher cure rates. And so it will be something if we if we do get on delinquencies coming into the fourth quarter, it's something we'll have to look at from a reserving standpoint of of how do we reserve for those that we believe are sort of the influx related to hurricanes that have a higher propensity to cure overtime on based upon, you know, sort of federal funds that come in for relief and and it's sort of a life event, but it's a hopefully a temporary one that ultimately they get back on their feet versus sort of our average delinquency that is maybe more related to a life event that could be more permanent in nature was job loss, things like that. That has a it still has a high seated here, but just not the rate that we've seen sort of for financial disasters like hurricanes.

Scott Heleniak

And that's that makes sense. That's helpful. And then the other question I was just on the what's the what does your new money yield versus expiring yield and any floating rate debt exposure that you can point out? Just just trying to get the sensitivity to interest rates as they continue to probably go down.

Tim Mattke

Scott, has it been easier in terms of new money rates recently? I think I kind of low fives maybe to mid-5 range against the cost of 4% book yield on the long portfolio and then exposure to floating rate. There is a little bit. We have a kind of a mid single digit size, some CLO portfolio that's floating rate and some other things. But generally, duration of the portfolio is around four years. So I think our biggest exposure to shorter term rates would just be on the cash and cash equivalents portfolio where we've benefited somewhat from having no five plus percent rates there. So if the Fed continues to cut rates, that will be a headwind. But in terms of mix closure on a longer and kind of true investment portfolio, it's relatively modest.

Scott Heleniak

Got it. Appreciate the answers.

Operator

Thanks, Scott. Thank you for your questions.
Ladies and gentlemen, this concludes the question and answer session. I would now like to turn it back to management for closing remarks.

Tim Mattke

Thank you, Gerald. I want to thank everyone for your interest in MGIC today's election day. I hope everyone find time to get out and vote if you haven't done so already, have a great rest of your week.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.