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MGIC Investment Corp (NYSE:MTG)
Q1 2020 Earnings Call
May 8, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MGIC Investment Corporation First Quarter Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Mr. Mike Zimmerman. Please go ahead, sir.

Michael J. Zimmerman -- Investor Media Contact

Thank you, Sean. Good morning, and thank you for joining us this morning and for your interest in MGIC Investment Corporation. Joining me on the call today to discuss the results for the first quarter of 2020 are Chief Executive Officer, Tim Mattke and Chief Financial Officer, Nathan Colson.

I want to remind all participants that our earnings release of this morning, which may be accessed on MGIC's website, which is located at mtg.mgic.com under Newsroom, includes additional information about the Company's quarterly results that we will refer to during the call and include certain non-GAAP financial measures.

We have posted on our website a presentation that contains information pertaining to our primary risk in force and new insurance written and other information we think you will find valuable.

I also want to remind listeners that from time to time, we may post information about our underwriting guidelines and other presentations or corrections to past presentations on our website that investors and other interested parties may find valuable as well.

During the course of this call, we may make comments about our expectations of the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about those factors, including COVID-19 that could cause actual results to differ materially from those discussed on the call are contained in the Form 8-K and 10-Q that was filed last night.

If the Company makes any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent developments. Further, no interested party should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of the Form 8K or 10-Q.

At this time, I will turn the call over to Tim Mattke, our CEO. Tim?

Timothy J. Mattke -- Chief Executive Officer

Thanks, Mike, and good morning, everyone. I want to start by saying that I hope everyone who is listening is safe and well. Next, I want to express my gratitude and admiration to my fellow MGIC co-workers and their families. Your efforts day in and day out over the last several weeks to support our customers, your local communities and your fellow co-workers, while coping with your own personal circumstances, has always defined the culture of MGIC, so thank you.

The safety and health of our co-workers and their families is a responsibility I do not take lightly. On a Friday afternoon in mid-March, we made the decision to transition our operations to a remote work environment. Certain teams had operated remotely for some time, while this had been done only occasionally and typically for a weather-related event. But by the Monday following our decision, nearly the entire organization logged on remotely and was standing by ready to serve our customers. I am proud to say that MGIC has continued to serve our customers every day since then as well.

And perhaps a sign of our resiliency, working remotely is solely becoming a matter of routine as we adapt to the current environment. In addition to the health and safety of our employees, as we navigate through the current environment, we are focused on; one, continuing to provide critical support to the current housing market; and two, positioning our company prosper over the long-term.

We strive to achieve those goals by, among other things, working with the GSEs and servicers on loss avoidance programs, offering competitive products and services to our customers and maintaining a sharp focus on the sources and uses of our capital. We think this is the best approach for all stakeholders and is particularly relevant as we manage through the current situation.

More on the future in a minute, but first, I want to spend a few minutes providing a high-level summary of our financial results for the first quarter and our current financial position. Then Nathan will cover some more details of the financial results.

During the first quarter, the favorable new business and credit trends we'd experienced for the last few years continued. Our insurance in force increased approximately 6.7% year-over-year and number of loans delinquent declined. GAAP net income for the quarter was $149.8 million. Losses incurred is typically what creates the variability in our results in any given period.

The favorable activity of new delinquency notice activity and cures of previously reported notices continued in the first quarter. However, to reflect the current environment, we did make some modest changes to our loss reserve estimates that Nathan will cover in more detail.

From a new business perspective, through April, our current pipeline of applications remain robust. The combination of our applications, lender reports and the MBA indices provide us with reasonable visibility into NIW over the next couple of months.

However, although our current pipeline remains robust, there is considerably less visibility regarding the future business, especially in the current environment. Discussions with lenders as well as the most recent MBA application index data, despite the recent increases, point to a meaningful contraction and purchase application, while refinanced transactions remain up more than 200% year-over-year.

Given the high level of activity to-date and the uncertainty of when purchase activity will fully recover and the ultimate size of the refinance market, it is still too early to draw any meaningful conclusions about the full year impact on new insurance written, persistency and insurance in force growth.

We expect that the increase in unemployment and economic uncertainty resulting from initiatives to reduce the transmission of COVID-19, including shelter-in-place restrictions will negatively impact our business. In the current environment, because of many uncertainties pertaining to COVID-19 as we discussed in our risk factors in the 10-Q, it is very difficult to confidently forecast the impact to our financial results and capital position.

However, as we enter this period of uncertainty with a book of business that is of high-quality with low delinquencies and we are supported by a balance sheet that has a lower debt-to-capital ratio and nearly $6 billion investment portfolio, contractual premium flow and a robust reinsurance program.

We estimate at the end of March, we had approximately $1 billion in excess of the minimum required assets that are required by the Private Mortgage Insurance Eligibility Requirements, or PMIERs, of the GSEs, Fannie Mae and Freddie Mac. We also had $2.8 billion in excess of the minimum state capital requirements.

During the quarter, we repurchased 9.6 million shares of our common stock. While there is $291 million remaining under the authorization that expires at the end of 2021 and approximately $563 million of cash and investments at the holding company, due to the uncertainties surrounding COVID-19, we have temporarily suspended share repurchases.

During the first quarter, we received fewer new notices than the same period last year, but reflecting the current environment, we used a slightly higher claim rate on those notices. Not surprisingly, delinquency notices received in April increased from the number received in March, and we anticipate that more significant increase will occur in May and June, and especially in light of the reported forbearance rates on GSE loans over the past several weeks.

As a result, we expect our losses incurred will increase as well our PMIERs minimum required assets. The magnitude of any increase to loss incurred will be a function of the number of notices received that eventually result in a claim paid. Understandably, there are a lot of questions about the potential impacts to our business caused by the COVID-19, notably the potential for higher incurred and ultimately higher paid losses. Unfortunately today, we do not have sufficient data available to address them with the level of confidence we would like.

With that, let me turn it over to Nathan.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Thanks, Tim. I will spend a few minutes talking about the first quarter and then we'll turn to some of the uncertainties that Tim mentioned. In the first quarter, we earned $149.8 million of net income or $0.42 per diluted share, which compares to $151.9 million of net income or $0.42 per diluted share from the same period last year.

Net premiums earned increased 4% compared to the same period last year, which was primarily driven by two factors. First, insurance in force was higher, although this was partially offset by lower average premium rates on net insurance in force.

Second, accelerated premiums from single premium policy cancellations increased $6 million -- increased from $6 million in the first quarter of 2019 to $18 million in the first quarter of 2020, reflecting the strong refinance market. Net losses incurred were $61 million compared to $39 million in the same period last year.

In the first quarter of 2020, we received approximately 9% fewer new delinquency notices than we did in the same period last year. The estimated claim rate on new notices received in the first quarter of 2020 was 9%, which is higher than the 8% rate that we used the last several quarters, reflecting some level of uncertainty given the current macroeconomic environment, especially for borrowers that were delinquent before the broadest impacts from the COVID-19 pandemic.

Over the past several quarters, we had recorded favorable reserve development, including $31 million favorable development in the first quarter of 2019. In the first quarter of 2020, our reestimation of reserves on previous delinquencies resulted in $3 million of adverse loss reserve development. In the first quarter of 2020, we also increased our incurred but not reported, or IBNR, reserve from $22 million to $30 million.

The number of loans in our delinquency inventory remains near 20-year lows and decreased in the quarter, reflecting the low level of the delinquency inventory and improved cure rates. The number of claims received in the quarter declined by 21% from the same period last year. Primary paid claims declined 19% from $57 million to $46 million. We would expect claim payments to slow over the next few months due to the foreclosure moratoriums that are in place.

The net premium yield for the first quarter of 2020 was 46.6 basis points. Net premium yield has several components, the largest component is what we call the in-force portfolio yield, which reflects the premium rates and effect on our insurance in force. The components of the net premium yield are detailed in today's press release.

We continue to diligently monitor net underwriting and other expenses, which, before ceding commissions, totaled $56 million in the first quarter of 2020. A material portion of the year-over-year difference is related to certain expenses tied to our stock price.

During the first quarter, MGIC paid a total of $390 million in dividends to the holding company. MGIC is not planning to request from its regulator, the Wisconsin OCI, a dividend to be paid to the holding company in the second quarter.

Future dividend payments from MGIC to the holding company will be determined on a quarterly basis, in consultation with the Board and after considering any updated estimates about the length and severity of the economic impacts of the COVID-19 pandemic on our business. We also asked the Wisconsin OCI not to object before MGIC pays dividends to the holding company.

As Tim mentioned, during the first quarter, we repurchased 9.6 million shares of our common stock for a total cost of $120 million. We have approximately $291 million authorization remaining under our $300 million share repurchase program, which runs through the end of 2021. However, due to the uncertainty surrounding the COVID-19 pandemic, we have temporarily suspended repurchases.

As disclosed -- as previously disclosed, the Board declared a cash dividend of $0.06 per share payable on May 29th. Any future dividends will be determined on a quarterly basis and approved by the Board. As of April 30th, we have approximately $545 million of cash and investments at the holding company. Our next debt maturity is in approximately three years and our interest expense is approximately $60 million per year, of which $12 million gets paid to MGIC.

At quarter end, our consolidated cash and investments totaled $5.9 billion, including the cash and investments at the holding company. Investment income increased year-over-year, primarily as a result of a larger investment portfolio. The consolidated investment portfolio had a mix of 80% taxable and 20% tax-exempt securities, a pre-tax yield of 3.1% and a duration of four years. The net unrealized gain of the portfolio was $175 million at December 31st, 2019, $83 million at March 31st, 2020, and $142 million at April 30th, 2020.

At the end of the first quarter, our debt-to-total capital ratio was approximately 17%, and MGIC's available assets for PMIERs purposes totaled approximately $4.3 billion, resulting in a $1 billion excess over the minimum required assets. I realize many of you want to know, primarily for thinking about future GAAP results, what delinquency rate we expect during the duration of this crisis and how we will establish the claim rate and severity factors that we use to reserve for expected claim payments. So I want to spend a couple of minutes addressing those questions.

Our process will be grounded in the same process we consistently use to establish loss reserves. Over the next several months, we will monitor the level of new notices received, the level of delinquencies cured, the uptake of forbearance plans and current and expected economic activity.

And using that data, we will establish reserves that reflect our best estimate of the ultimate loss on both new and existing delinquencies. Ultimate losses are those items that we expect to result in MI claims and are net of expected cures, including cures due to successful loan workouts after a forbearance period is over.

Increased delinquencies are expected to begin in the second quarter. Therefore, when we report our second quarter results, we will have the benefit of observing the actual loan activity for the next few months, the impact of the various forbearance programs as well as changes in employment and general economic activity. These observations will be very informative as we establish claim rate and severity factors over the next few months.

Under the CARES Act and programs initiated by the GSEs, borrowers experiencing a hardship during the COVID-19 pandemic may obtain a payment forbearance for up to 360 days. While current loans that initiate a COVID-19 related forbearance are not reported as delinquent for consumer credit reporting purposes. If the borrower does not make payments during the forbearance period, they will be treated as delinquent for the purposes of the PMIERs, so they are reported to us as such from loan servicers. PMIERs generally require us to maintain significantly more minimum required assets for delinquent loans than for performing loans.

The PMIERs required asset factors for delinquent loans are based on the number of mis-payments and whether a claim has been received, that PMIERs provides for those factors to be reduced on loans that are reported delinquent that are in a FEMA-declared major disaster area. Specifically, this reduces the minimum required asset charge by 70% for at least 120 days from the initial default date and longer if the loan is subject to a forbearance plan that is in a state where the FEMA major disaster declaration provides for individual assistance.

Currently, we estimate that approximately 90% of our risk in force is located in FEMA designated disaster areas with individual assistance. We expect that servicers will be reporting a delinquent loan that is in forbearance to us just as they are required to do for the GSEs. This results in a smaller incremental capital requirement for each new delinquency. However, because we cannot predict the number of delinquencies that will occur nor how long they will persist, we cannot currently estimate the increased amount of minimum required assets, we'll be required to hold as a result of the COVID-19 pandemic.

This estimation exercise is further complicated for future periods as assumptions need to be made about a number of items, including the level of new business written and persistency. In the portfolio supplement posted to our website, we provided an illustrative example of the level of incremental delinquencies that are current excess of available assets over PMIERs' minimum required assets could have absorbed on a pro forma basis as of March 31st.

Making certain assumptions in order to simplify the analysis, on a pro forma basis, it would have taken approximately 235,000 incremental delinquent loans to consume the $1 billion excess available assets that existed at March 31st, after considering the quota share reinsurance and assuming all incremental delinquent loans received the 70% reduction for FEMA-declared major disasters.

With that, let me turn it back to Tim.

Timothy J. Mattke -- Chief Executive Officer

Thanks, Nathan. Before moving to questions, it is clear that the last couple of months have changed nearly everyone's personal and professional agendas and objectives that includes the regulatory and political topics we normally discuss. Nearly all the attention in Washington D.C. that was centered on housing reform has been temporarily paused and the attention has turned to how to keep the housing finance market functioning in the current and post-COVID-19 world.

We expect that the GSE capital rule, the reproposed QM rule, including a GSE Patch and other reviews by the FHFA of GSE activities, will all be delayed for some period of time. On the government reaction front, significant number of actions have already taken to help the American consumer and economy weather their crisis. These actions include, among other items, direct payments to consumers, the Paycheck Protection Program, to enhanced unemployment benefits.

On the mortgage front, the GSEs and some lenders have taken a number of steps to ease certain origination guidelines, while appropriately tightening others. Nearly all the changes that GSEs have put forth are either supportive of making a refinance easier to complete, which improves the borrower's ability to pay or supportive of ensuring that a borrower's ability to pay on a purchase transaction is sustainable.

On the servicing side, the GSEs and the CARES Act suspended for closures for at least 60 days to make available loan forbearance programs for borrowers experiencing financial hardships. These forbearance programs can last up to 12 months and at that point, a loan workout or modification can be completed as appropriate, which would bring the loan current.

We believe these programs, much like the GSE programs for hurricanes and other natural disasters, are designed to help borrowers avoid adverse credit implications and foreclosure while they are temporarily unemployed as a result of the disaster.

Historically, with hurricanes or other natural disasters, these programs are very successful, and most borrowers who entered a forbearance plan were reported current several months later as the temporary hardship ended. Of course, our nation has never seen a dramatic reduction to the economy in such a short period of time like it's occurring now.

As Nathan discussed, these programs have PMIERs implications, and we and all the other mortgage insurers are engaged in constructive discussions with the Federal Housing Finance Agency and the GSEs to gain more clarity about the application of PMIERs on a longer-term basis, including the requirements to continue to reduce the minimum required assets for loans and forbearance by 70% as well as the application of several other provisions of PMIERs in the current environment.

While other market options for credit enhancement are unavailable, our industry and our company continue to provide credit enhancement solutions to lenders, borrowers and the GSEs. While our priority is working on prudent solutions and responses to the current environment, we continue to be actively engaged in housing discussions and policies, and we continue to advocate for and remain optimistic that the changes do occur will include the use of private capital, including private MI.

Long term, we still remain encouraged about the future role that our company and industry can play in housing finance, so it continues to be difficult to gauge what actions may be taken and the timing of any such actions as a result of COVID-19.

Private mortgage insurance offers many solutions and a great value proposition for lenders and consumers to overcome the number one barrier to homeownership, the down payment.

We enter this period of uncertainty with a book of business that is of high-quality and low delinquencies, and we are supported by a balance sheet that has a lower debt-to-capital ratio, nearly $6 billion investment portfolio, contractual premium flow and a robust reinsurance program.

In closing, as I mentioned at the beginning of my remarks, in addition to the health and safety of our employees, we are focused on continuing to provide critical support to the current housing market and positioning our company to prosper over the long term.

I want to remind listeners that our Company was founded in 1957. We have successfully navigated many economic cycles and have continually provided borrowers and lenders with affordable and prudent low down-payment options.

I am confident that we have the right team in place to navigate through this period of uncertainty, and we'll continue to deliver the quality products and service our customers have come to expect from MGIC.

With that, operator, let's take questions.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from the line of Jack Micenko, SIG.

Jack Micenko -- Susquehanna -- Analyst

Hi, good morning, everybody. Hope everybody is well. Nathan, going back to the illustrative example, you talked about 235,000 DQs, I guess that's about a 22%, 23% DQ rate on where the portfolio stands today. When you talk about the available cushion, are you assuming that those 235,000 sort of matriculate through the two to three to four to six to six-plus bucket over time or is that a point in time? And I'll just stop there for my first question. Thanks.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes, thanks for the question. It is, and I think we did try to footnote on the assumptions, it does assume that all incremental delinquent loans are in the two to three mis-payment bucket. It was really meant to be kind of at a point in time view as opposed to something more over time.

Jack Micenko -- Susquehanna -- Analyst

Got it. Okay. And then, I guess with the IBNR and the negative development, there's kind of doing what we can ahead of time. I know you're limited per accounting rules. What was in the 8% to 9% claim rate assumption? Can you remind us what that was around hurricanes? And then maybe lastly, what your claim rate assumption was or actual observed claim rates maybe were for 740-plus FICO business, in the sort of '08, '09 time frame?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes. I can certainly take the hurricane-related part of that question first here. We have used lower claim rates on hurricane-related notices in the past, claim rates in that 3% to 4% range. In terms of specific ultimate claim rates on delinquent items or cohorts from the crisis, I don't have that directly in front of me, but I think we have -- we did experience, on an overall basis, claim rates higher than the -- certainly, the 8% or 9% that we're using today. But I don't have a precise number for you.

Jack Micenko -- Susquehanna -- Analyst

Okay. So then just one more for me. Big increase year-over-year in NIW. I think you had a little bit more refi as well. I think you were like 35% refi. Anything there or is that maybe against an easier comp a year ago or just if you can add some color there because I think your year-to-year growth rate was pretty well in excess of the others that reported so far.

Timothy J. Mattke -- Chief Executive Officer

Yes. I mean, I don't think anything -- I mean, I think, obviously, a little bit from a comp standpoint, as we look to deploy our capital and win the business, where we think there's a good risk return; that can move around quarter-to-quarter. And so I don't know -- I don't think it's any conscious trend, let's say, to target specific segments there versus just as we look at sort of what the right risk return is. We're very happy with what we were able to acquire from NIW in the quarter.

Jack Micenko -- Susquehanna -- Analyst

Okay, thanks. Always appreciate that. Good luck.

Timothy J. Mattke -- Chief Executive Officer

Thanks.

Operator

Your next question comes from the line of Bose George.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Hey guys, good morning. So just actually going back to that Slide 8, the -- just when you look at your capacity, the 24.3% that you note there, I mean the capital at the holding company is incremental to that, right? So I mean, like a pro forma number, we could sort of assume that capital is there as well to beat any need to forbearance to do it both of that numbers. Is that right?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

This is Nathan. Yes, that's correct. That PMIERs excess represents the funds that are in MGIC today. So it doesn't include any of the funds at the holding company. The other thing I would point out, we also have -- MGIC has subsidiaries with approximately $300 million of capital that are not counted in that PMIER as excess as well, although it is included in our statutory capital. So from a levers to increase that, certainly have more than just the holding company.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Okay. So when we think about the availability to -- in a stress case, there's the bit of a $360 million-odd at the holding company plus this $300 million at the subsidiaries?

Michael J. Zimmerman -- Investor Media Contact

Bose, this is Mike. Yes. I mean, technically, yes, that's right. I mean, I think you've got to be somewhat cautious when contributing holding company. Holding company has obligations, right? So you can't assume that all capital is available. All the cash is available there. Certainly, there's interest carry and so on. So -- but on a technical basis, you are correct.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Yeah, OK. Great, thank. And then actually, just wanted to ask about pricing in the market. Peers have talked about price increases, what are you guys seeing? Do you have to raise prices? And if so, kind of what magnitude?

Timothy J. Mattke -- Chief Executive Officer

Yes. It's Tim. I'll take that. As we look at premium rates, as we always do, we consider the credit mix, what our loss expectations are and the capital charges we have to hold against that business we write. So accordingly, we did change, we react to the changed conditions. And depending upon the risk characteristics of the loan, we did increase our premium, probably approximately somewhere 10% to 50% within our risk-based pricing engine MiQ, that approximated probably about 55%, 60% of our business as of 3/31.

Bose George -- Keefe, Bruyette & Woods -- Analyst

So, OK. Great. Thank you.

Timothy J. Mattke -- Chief Executive Officer

Thank you.

Operator

Okay. Your next question comes from the line of Chris Gamiatoni from Compass Point.

Chris Gamiatoni -- Compass Point -- Analyst

Hey everyone. Nathan, of the $463 million of remaining ILN coverage, how much of that reduces the minimum required available assets under PMIERs?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes. I think maybe I'll answer the question a little bit differently. I'd maybe just give you the number that is -- I don't have the number that I think you're asking for there, but the number that -- the difference between the amount of ILN outstanding and the credit that we get under PMIERs as of 3/31 was about $26 million.

Chris Gamiatoni -- Compass Point -- Analyst

Okay, that's very helpful. And from an accounting standpoint, completely understand guessing the right default-to-claim for these forbearances will be really difficult. But as we progress, how do you evaluate whether or not you have to true-up that initial estimate? Meaning the programs give a borrower six months of forbearance and up to 12 months automatic extension, so it strikes me as the aging of those delinquencies is kind of irrelevant to that comp until the forbearance is over. So is it primarily just macroeconomic changes underlying the model or how does kind of the development factor is viewed versus your initial estimate?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes. It's Nathan. I'll take that one. I do think there's a lot of uncertainty as to whether people that enter forbearance plans will kind of automatically not make six payments. I think we've seen some data points that indicate that even after people are entering forbearance, they are still making payments. So I guess that would be one thing that over time we'll certainly have more information on what is the aging look like, and I think even my initial reaction was that people will automatically go for the full six months or full year.

But I think the early data would indicate that, that may not be the case. I think the point about aging being not as relevant for forbearance loans than non is certainly a factor that over time, we will have to think about how to appropriately reflect that. But I do think that you're correct that it's certainly different. What that ultimately means for us in terms of development or claim rate picks out into the future, I think there's just -- there's a lot of uncertainty.

Chris Gamiatoni -- Compass Point -- Analyst

Okay. And then on the amount of capital you have to handle, forbearance delinquency is very high, at least from what we know today, where forbearance rates are. Have you changed your NIW targeting in any way that focuses specifically on, call it, the new performing PMIERs load? Or is it still focusing -- your targeted focus is just trying to do the most business where you think the best economic return is?

Timothy J. Mattke -- Chief Executive Officer

Chris, this is Tim. I think it's the latter. We aren't -- what I read into your question, sort of the first part was, are we somehow trying to, I guess, control the amount of NIW we write to conserve amount of the capital. I think that's not the case. We are very focused on the risk return and deploying capital where we think we can get the appropriate returns, and that's sort of our -- that's where we are currently. I have expectation that's where we're going to be, but feel that that's the equation that we've been dealing with for a while and expect that's going to continue.

Chris Gamiatoni -- Compass Point -- Analyst

All right, perfect. Thank you so much. That's all I had.

Timothy J. Mattke -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next caller is Mihir.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Hi, thanks for taking my questions. And I hope everyone is saying safe and healthy. I just wanted to start going back on forbearance and forbearance trends. I guess the first question I had was just wanted to get a better understanding of how much data do you actually get in terms of what is coming?

So does the servicer tell you that, hey, these loans have gone into forbearance, even if they are not two payments delinquent? Or is it, oops, this loan is now two payments delinquent, so you kind of just are reacting for how much like just additional advance [Speech Overlap] note that they have?

Michael J. Zimmerman -- Investor Media Contact

Yes, sure. This is Mike. I followed it all right. It was a little choppy right up, but as far as the reporting from servicers, you're right. So let's just start kind of just a reminder of kind of the flow on a monthly basis. So late in each month, we receive files from servicers. So, for example, in the -- in late April, we received files that revealed to us loans that were delinquent, missed their March 1st and April 1st payment, and then that's what triggers the delinquency reporting to us, all right? That's kind of standard, fair.

Included in the reporting that comes to us is that they -- like they do with the GSEs, they need to report loans that are either -- what is the delinquency status? What's the reason for the delinquency? Is it in forbearance? Is this not in forbearance? Is it in a repayment plan? It's various coding. Now a lot of that, we do rely upon the servicers to get that in. So the reporting will come in, but it has to -- we rely upon the servicers to do that information. So we will -- we do expect to receive it coming in.

Servicers, along with the MI industry, along with the GSEs that they've been working together to make sure that the coding gets recorded appropriately. And so we do expect to receive it coming in. We have not received much information to date, right, because these are going -- we expect an increase of it going forward. We have received some very limited data through the month of April, that it's consistent somewhat with the forbearance rates that we've seen been reported in the press by MBA surveys, Black Knight data.

But I would caution to say that it's what we know. We don't know if that's an all-inclusive number because we're only getting reported loans that are delinquent. So for example, if a loan is current and enters into a forbearance period, it will never be reported to us if it continues to make those payments. Because it's not past due and won't meet the trigger for reporting purposes. So hopefully, that's responsive to what your question was.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Yes. No, actually, on that last one, if I could just clarify. So if -- so just -- sorry, if I make my, let's say, a borrower makes their March payment, then COVID happens, they're proactive, they call their servicer, they enter into a forbearance plan, and then they missed their April and May payment. Would that -- that borrower would still be considered delinquent, right, in June?

Michael J. Zimmerman -- Investor Media Contact

The loan -- we would expect that loan to be reported to us due for April 1st. We would get that filed in June, and we would expect it to be reported delinquent to us, yes.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Okay, alright. No, that is what I was thinking...

Michael J. Zimmerman -- Investor Media Contact

What I was pointing out here was if they made their April 1st payment or they've made the March 1st payment, entered into forbearance and then made their April 1st payment, we would never see, but they're in a forbearance, they just have accepted it. That would not be reported delinquent to us.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Okay. No, understood. Understood, thank you. That is actually helpful in clarifying. And then just one other question in terms of your reinsurance plans and what you're seeing in terms of the ILN market or even QSR. I guess, you just entered one. But just want to make sure what you're seeing in there, any comments you have? Thank you.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes, this is Nathan. Yes, you mentioned our quota share program, we did -- we do have a 30% quota share covering the majority of our 2020 business. In terms of the ILN market, I think what we've always said is that we would like to be programmatic issuers in that market when it makes sense. Right now I think that market is really distressed still.

Really, the ILN market has always been, I would view it as a subset of the GSE CRT market. So when the GSE CRT market opens back up for primary issuance, I think that will be the first positive indicator for potentially future ILN issuance out of the MI space.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Understood. Thank you. Those are my questions. Thank you.

Timothy J. Mattke -- Chief Executive Officer

Thanks.

Operator

Okay. And caller, please introduce yourself.

Adam Starr -- Gulfside Asset Management -- Analyst

Hi, it's Adam Starr at Gulfside Asset Management. Are you still collecting premium on loans that are in forbearance, whether they're delinquent or not?

Michael J. Zimmerman -- Investor Media Contact

Yes, Adam, it's Mike. Good to hear from you. Yes, we do continue to receive premium, and we would expect to continue to receive premium from the -- on all policies, whether they're current or delinquent. Now just as a reminder though, once the loan goes delinquent, our master policy does not -- because it is a delinquent, the event occurred, the servicers are typically not obligated in our policy, but they are obligated under the GSEs to advance that premium to it.

But as we do get paid premium on delinquent loans, we set up a reserve based on estimated claim rates for a refund of that premium back. So we don't count delinquent premium that we expect to be associated with claims as revenue.

Adam Starr -- Gulfside Asset Management -- Analyst

You get the cash, but you don't accrue it into earnings. You offset it.

Michael J. Zimmerman -- Investor Media Contact

Correct.

Adam Starr -- Gulfside Asset Management -- Analyst

Thank you very much and wishing you all the best and appreciate you doing the call.

Michael J. Zimmerman -- Investor Media Contact

Thanks Adam, me too.

Operator

Okay. Your next caller is A. Winston from Pilot Advisor.

Arthur Winston -- Pilot Advisors LP -- Analyst

Hi. Thank you. And following-up Adam's question, I was curious if you could give us some sense of the cash collections of premium, say, for April compared to January or February and actually cash coming into the -- into MGIC from the premiums?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes. This is Nathan. We didn't notice any really meaningful change month-over-month as we looked at January to February to March to April. And there's a little variability with just single premium policies because, obviously, that premium is all paid upfront. But in terms of the renewal policies that I think are kind of the focus of the question, that's something that we just haven't seen really any change in.

Arthur Winston -- Pilot Advisors LP -- Analyst

So basically, the mortgage services, for the most part, are reasonably healthy is what you're saying?

Michael J. Zimmerman -- Investor Media Contact

I would -- this is Mike. I want to just reiterate what -- I wouldn't want to make any statement about others, but we're receiving the cash, as Nathan described.

Arthur Winston -- Pilot Advisors LP -- Analyst

Thank you very much.

Operator

Okay, one moment. Your next question comes from the line of Sam Choe, Credit Suisse.

Sam Choe -- Credit Suisse -- Analyst

Hi guys. I'm on for Doug today. So I just wanted to ask one of the earlier questions in more of a broader sense. So when we are thinking about -- like the 2017 hurricanes and other natural disasters, how -- like what are the key takeaways that we should be thinking about, whether it's credit-related and operationally?

Timothy J. Mattke -- Chief Executive Officer

I guess -- it's Tim. Just, I mean, the way I -- we addressed it a little bit in the opening comments. I think what we learned from that is that when there's government intervention and allowed for forbearance that there can be a pretty large uptick, and if those can sort of clear up in a few months as people get back their employment, I think what we tried to point out early on is, there's some similarities here and that there's a wide spread sort of impact in unemployment and widespread forbearance obviously being offered, and so we expect there to be a large uptake.

I think a little bit of difference here is we don't know how long the economic uncertainty will last. And so I think while we're all hopeful that the economy gets back working and people get their jobs back very quickly and if that means that they'll come out of forbearance within a few months and relatively quickly, like they do following a natural disaster, the reality is, we don't know that. It's not an exact comp. But especially with the uptake in the foreclosures or in the forbearance, we expect to see similar. So I think that's why we use the natural disasters and the hurricanes as a starting for the comp.

Sam Choe -- Credit Suisse -- Analyst

Okay. Another question. Do you guys keep track of employment statistics for your customers? And if so, like, are you able to share that data?

Michael J. Zimmerman -- Investor Media Contact

Hey Sam, it's Mike. The information that we have is always at the point of origination whether that's the FICO scores, etc. So the short answer, I guess, would be, no, we don't have current employment information.

Sam Choe -- Credit Suisse -- Analyst

Got it. Okay. Thanks so much.

Michael J. Zimmerman -- Investor Media Contact

Thanks.

Operator

Okay. Mr. Dunn, your line is open.

Geoffrey M. Dunn -- Dowling & Partners -- Analyst

I'm not sure if that's for me. Am I on?

Michael J. Zimmerman -- Investor Media Contact

Yes Geoff. Go ahead, Geoff.

Geoffrey M. Dunn -- Dowling & Partners -- Analyst

Sorry, I couldn't hear the operator. I just want to -- I had one clarification on the analysis you put out. In the footnote, it says ILNs are not considered. Is there an incremental adjustment we could also make to further refine the analysis or are ILNs effectively already in there because of the benefit they have on MRA and are reflected in the $1 billion excess to PMIERs?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Geoff, it's Nathan. That's a good point. I mean the insurance-linked notes are included in that $1 billion PMIERs excess. Certainly, I think when we said, not considered, it was more of the additional $26 million that Chris had asked about before, which is the amount of ILN capacity to absorb PMIERs that's not currently taking as a benefit today.

Geoffrey M. Dunn -- Dowling & Partners -- Analyst

So theoretically, it's $1.26 billion if we wanted to adjust instead of $1 billion? Round numbers.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes. I mean, the $26 million is not included in our PMIERs excess.

Geoffrey M. Dunn -- Dowling & Partners -- Analyst

Got you. All right. Thanks.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Thanks, Geoff.

Operator

Your next question comes from the line of Phil Stefano, Deutsche Bank.

Philip Stefano -- Deutsche Bank Securities Inc. -- Analyst

Yes. Thanks. Hey, I guess I'm somewhat following up for Mihir's questions earlier. When we look at the -- some monthly defaults that you had reported, April had -- feels like a bit of a pop in it. And I guess in my mind, I partially suspect that maybe there's some forbearances that you're treating as defaults, even though it's not technically a default? But it feels like that's not necessarily the case. And is there anything in April that you're aware of or why the reporting of new defaults may have ticked up than what we saw from Q1?

Timothy J. Mattke -- Chief Executive Officer

Phil, I think there are likely some forbearance within the April numbers, and I guess the way I sort of think about it is, there were likely people who had missed their March payment already before the COVID-19 sort of impact started to happen. And as they got to their April payments with the CARES Act and things that were in place, they sort of entered forbearance, and then that meant that they did not make their April payment and so saw that uptick.

What I think what we're expecting is to see more of an uptick in the May and the June and for people who would have been fully current prior to COVID-19, who then start to miss their payments. So I think what you're seeing in April is people who would have missed a payment, and a lot of times those will never get to us, but with COVID-19 and sort of the forbearance in place, ended up missing the second payment, maybe otherwise would not have missed their second payment and then reported delinquent to us.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

[Speech Overlap] Sorry, Phil. I just want to add to that. Within that April delinquency number that we reported in the press release, we have gotten some reporting from some servicers and so there's approximately 2,500 forbearances of those delinquent loans have been reported to us, so that's about 8%. But we don't know if that's the entirety of the population that's in forbearance. So we haven't gotten complete reporting from all services, but we have gotten some.

Philip Stefano -- Deutsche Bank Securities Inc. -- Analyst

But I guess, is it the right way to think about that -- this cohort or this uptick is that people who are teetering on defaulting and then the world kind of fell apart around them and it just gave them a lifeline to go into forbearance?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Phil, every family makes their own decisions, and we don't have visibility in, so it's hard to draw those generalities or we're reluctant to draw those generalities. I'm not saying your hypothesis could be -- is incorrect. But I wouldn't want to, I guess, reinforce that because we don't have good visibility into that.

Philip Stefano -- Deutsche Bank Securities Inc. -- Analyst

That's fair enough. So my second question is -- and it's likely premature, but I wanted to talk about the contingency reserve. And to the extent that the loss ratios for the year got above 35%, what's involved in the consideration of trying to access that reserve or why would you? Why wouldn't you? How should I think about that?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Yes. It's Nathan. I mean, you're correct that the way the rules work on contingency reserves is, if the loss ratio for the year is above 35%, then we can release that contingency reserve. The release is done on a first-in, first-out basis. So you'd really be releasing from contingency reserves that we added in maybe the 2013, 2014 time period. I think -- I view that as almost formulaic as opposed to a judgment that we would make to release it or not.

It's really just kind of set aside capital. So moving it from contingency reserve. Really, it just moves into surplus at that point. I think that's something that we've consistently done when we have had loss ratios that allowed us to release contingency reserves. So I wouldn't view it as something that really there is a lot of decisioning on, just something that would naturally happen if we were in that circumstance.

Philip Stefano -- Deutsche Bank Securities Inc. -- Analyst

Okay. Got it. I guess this is more formulaic. I thought there was a bit -- there is a bit of discretion to it. Got it. Understood. Thank you so much.

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Thank you Phil.

Operator

Onto your next caller, please introduce yourself. And you line is open.

Michael J. Zimmerman -- Investor Media Contact

Sounds like breakfast. Okay.

Operator

Okay.

Michael J. Zimmerman -- Investor Media Contact

We'll just move on Sean. Thank you.

Operator

Okay, no problem.

Mark DeVries -- Barclays Capital -- Analyst

Hello?

Michael J. Zimmerman -- Investor Media Contact

Hello? Yes.

Mark DeVries -- Barclays Capital -- Analyst

Hey, sorry, it's Mark DeVries

Michael J. Zimmerman -- Investor Media Contact

Hey, Mark.

Mark DeVries -- Barclays Capital -- Analyst

Sorry for the confusion. So the question I have is, are there any assets available to the holding company outside of the cash there that could be used to support the writing company? Anything like a committed undrawn lines of credit?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Mark, this is Nathan. No, we don't have a credit facility at the holding company at this time.

Michael J. Zimmerman -- Investor Media Contact

Mark, this is Mike, I just want to make sure you heard the earlier comments Nathan made about other subsidiaries that are not that we have. I think he mentioned $300 million that's on other subsidiaries that's not in the MGIC available in that excess, reflected in that cushion.

Mark DeVries -- Barclays Capital -- Analyst

Yes.

Michael J. Zimmerman -- Investor Media Contact

Okay. Just wanted to make sure.

Mark DeVries -- Barclays Capital -- Analyst

Okay. What I didn't hear in the response and I don't know if you gave this outside of the commitments of the holding company, how much you view is available to push down, if necessary?

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Well, I think -- I mean, this is Nathan. At this time, we're certainly evaluating how new notices come in, but feel like with the things that -- not only the PMIERs access that we currently have and its ability to withstand large increases in delinquent loans, but also some of the other levers that Mike mentioned with capital at other subsidiaries of MGIC that would really just be upstreaming capital back to their parent company.

That gives us even more flexibility. And then this obviously will take place over some period of time, and we're still generating strong cash from operations even in this environment, which will organically generate capital. So I think we feel like we have a lot of levers that would be pulled before we go to the holding company and think about funds there.

Mark DeVries -- Barclays Capital -- Analyst

Okay. Got it. And then in the scenario you laid out where you could absorb up to -- you could see delinquencies up to 24% and have that all absorbed by your existing excess. How do you think about whether FHFA would want to see you with delinquencies really high and rising have some level of cushion over and above kind of your required assets?

Timothy J. Mattke -- Chief Executive Officer

Mark, it's Tim. I think it's something that we think of, and I think it's a good question to ask. I don't know what the exact answer is. My view is, we're an insurance company. PMIERs are put in place to make sure that us, as MIs compare claims. Obviously, the FHFA and GSEs as they look and they can change PMIERs whenever they want to. What they want to do is make sure they get paid their claims.

And so I think -- I feel comfortable with sort of the thought process we went through; obviously, feel good about the relationship with them and that they're being thoughtful about this. It's really tough though to know if they would say we need to have some excess of where we are, but we've always operated under the assumption that they could change PMIERs if they want to, if they felt like they needed to.

I haven't received any indication that will lead me to believe that's the case at all. The only dialogue we've had, quite frankly, as an industry has been around some of the nuances of how to apply PMIERs to the current forbearance situation, knowing it's not exactly on point with the hurricanes as long as -- as far as how this long could be a duration for.

Mark DeVries -- Barclays Capital -- Analyst

Okay. Got it. Thank you.

Timothy J. Mattke -- Chief Executive Officer

Sure.

Operator

And there are no final questions. I will now turn it back over to management.

Timothy J. Mattke -- Chief Executive Officer

Thanks, Sean. As we close, I just wanted to take a moment to appreciate all the first responders who are on the front lines of this pandemic. The courage is inspiring. For everyone else listening to the call, I just want to say I hope you and your families are safe and healthy.

And finally, as we head into this weekend, I want to take an early moment to wish a happy Mother's Day to all the mothers out there. So thank you for your interest in MGIC.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Michael J. Zimmerman -- Investor Media Contact

Timothy J. Mattke -- Chief Executive Officer

Nathaniel H. Colson -- Executive Vice President and Chief Financial Officer

Jack Micenko -- Susquehanna -- Analyst

Bose George -- Keefe, Bruyette & Woods -- Analyst

Chris Gamiatoni -- Compass Point -- Analyst

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Adam Starr -- Gulfside Asset Management -- Analyst

Arthur Winston -- Pilot Advisors LP -- Analyst

Sam Choe -- Credit Suisse -- Analyst

Geoffrey M. Dunn -- Dowling & Partners -- Analyst

Philip Stefano -- Deutsche Bank Securities Inc. -- Analyst

Mark DeVries -- Barclays Capital -- Analyst

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