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MGIC Investment Corp (NYSE:MTG)
Q1 2021 Earnings Call
May 6, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the MGIC Investment Corporation First Quarter 2021 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mike Zimmerman, Senior Vice President, Investor Relations. Please go ahead.

Michael J. Zimmerman -- Investor Media Contact

Thanks, Laurie. 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 2021, our Chief Executive Officer Tim Mattke; and Chief Financial Officer Nathan Colson. I want to remind all participants that our earnings release of last evening, which may be accessed on our 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 includes the reconciliation of non-GAAP financial measures to their most comparable GAAP measures.

We have posted on our website a presentation that contains information pertaining to our primary risk in force, new insurance written, reinsurance transactions and other information which we think you'll 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 -- correction, the past presentations on our website that investors and other interested parties should be aware of. 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 in the call are contained in the Form 8-K and Form 10-Q that were 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 K or 10-Q.

At this time, I'd like to introduce Tim Mattke.

Tim Mattke -- Chief Executive Officer

Thanks, Mike. Good morning, everyone. I'm pleased to report that we produced another quarter of very strong financial results. After my opening remarks, Nathan will provide more detail about those financial results and about our capital position. Then before we open the line for questions, I will wrap up by discussing the current operating environment, including activities related to housing policy. During the quarter, we earned GAAP net income of $150 million, which reflects a strong credit profile and performance of our insurance in force, the favorable housing and mortgage market trends, improving economic conditions and our market presence.

For some time now, our main business objective has been to use our resources to provide critical support to the housing market, especially first-time and low- and moderate-income home buyers. We strive to achieve that objective by, among other things, providing competitive offerings and best-in-class service to mortgage originators and servicers and by maintaining a sharp focus on the sources and uses of our capital. This strategy has allowed us to capitalize on the strong demand for single family housing.

Our new insurance written, or NIW, continued to be weighed more heavily toward the purchase transactions versus refinance transactions, accounting for 60% of our NIW in the first quarter. While interest rates were higher in the first quarter than at times in 2020, they are still very attractive for many borrowers, whether to purchase a home or to refinance, and our industry continued to enjoy a relatively larger market share of refinances than in prior periods. These strong housing and mortgage market conditions led to another very busy quarter for our customers. And as a result of this, and our market presence, we wrote nearly $31 billion of NIW in the first quarter.

While the first quarter provided a strong start for new business in 2021, we do expect that higher interest rates and the recent gains in property values will slow the volume of refinance transactions available to insure. In fact, we have begun to see the mix shift toward more purchase transactions in our application pipeline, a leading indicator of NIW, with purchase transactions making up more than 75% of the applications in recent weeks. The level of new business we wrote in the quarter more than offset the pressure of lower annual persistency on our existing book of business caused by refinance activity and resulted in our insurance in growing to $252 billion, more than 11% higher than the same period last year.

While the supply of housing inventory available for purchase is low, we still expect robust purchase market conditions to continue as demand remains strong. I expect that those conditions will continue to allow our insurance in force to grow, although perhaps at a slower annual rate than we have been enjoying in recent quarters. Reflecting the underlying economic conditions, the quality of our existing book of business and the number of new delinquency notices received, our loss ratio declined to 15.5% in the quarter.

I continue to be encouraged by the trends we are seeing in the credit performance, including delinquency rate, which continues to decline as fewer loans become delinquent and existing delinquent loans continue to cure. This trend continued through April, where we saw our lowest level of new delinquency notices in more than a decade with strong cure activity on previously delinquent loans. As a result of credit performance, reinsurance transactions and continued strong cash from operations, we estimate that the spread of our PMIERs available assets over PMIERs minimum required assets increased by approximately $500 million in the quarter and that our PMIERs efficiency ratio was 169% at the end of the quarter.

While we're keenly focused on maximizing the near-term business opportunities and navigating the outstanding COVID-related challenges, we remain focused on the long-term success of the company. We have a strong balance sheet, we are confident in our position in the market, and we like the risk-reward equation that the current conditions offer. With that, let me turn it over to Nathan.

Nathan Colson -- Executive Vice President and Chief Financial Officer

Thanks, Tim, and good morning. As Tim mentioned and the results show, we had another strong quarter of financial results as the impact on our business from the effects of COVID-19 continues to diminish. In the first quarter, we earned $150 million of net income or $0.43 per diluted share and generated an annualized 13% return on beginning shareholders' equity. This compares to $150 million of net income or $0.42 per diluted share and an annualized 14% return on beginning shareholders' equity in the same period last year.

Adjusted net operating income per diluted share in the first quarter was $0.01 lower than the reported GAAP amount. A detailed reconciliation of GAAP net income to adjusted net operating income can be found in the press release. During the quarter, total revenues were $298 million compared to $307 million last year, with the decrease primarily due to lower investment income and lower net premium earned. Investment income was lower as the larger investment portfolio was more than offset by lower yields. Net premiums earned were lower primarily due to a lower net premium yield and an increase in the amount of premiums and risk ceded through our reinsurance transactions.

These effects were partially offset by an increase in accelerated premiums earned from single premium policy cancellations compared to the first quarter of 2020 and higher average insurance in force. The net premium yield for the first quarter was approximately 41 basis points, which was down sequentially by approximately two basis points, primarily because the in force premium yield continues to reprice through attrition of the older policies, which generally have higher premium rates.

We also realized less benefit from accelerated premiums earned from single premium policy cancellations compared to the fourth quarter of 2020. Single premium policies represent a smaller percentage of our in force portfolio than in 2020 due to the increased level of refinances over the last several quarters, and there is also a smaller percentage of our new business being generated from these policies. During the quarter, accelerated premiums from single premium policy cancellations were $28 million compared to $32 million last quarter and $18 million in the first quarter of 2020.

I expect the direct in force premium yields to continue to trend lower throughout 2021 as the older policies, which generally have higher premium rates run off and are replaced with new policies, which generally have lower premium rates. However, due to the recognition of accelerated single premiums, the level of profit commission and the impact of new business, the change in the net premium yield is more difficult to reliably forecast, but is also expected to decline over time. Despite the lower premium rates on newer policies, we expect to earn attractive risk-adjusted returns on our new business written. Shifting over to credit.

Net losses incurred were $40 million in the first quarter compared to $61 million for the same period last year. In the first quarter, we received approximately 13,000 new delinquency notices, which represents 1.2% of the number of loans insured as of the end of 2020, which was the same percentage that rolled from current to delinquent in the first quarter last year. We are encouraged by the fact that this ratio has returned to its pre-COVID level. The estimated claim rate on new notices received in the first quarter of 2021 was approximately 7.5% compared to 9% in the first quarter of 2020.

As we do each quarter, we reevaluated our loss reserves on our existing delinquency inventory and, in the first quarter of 2021, determined that there was a material loss reserve development compared to $3 million of unfavorable development in the first quarter last year. We reduced our reserve for incurred but not reported, or IBNR, delinquencies in the first quarter of 2021 by $4 million to approximately $24 million compared to an increase of $8 million in the first quarter of 2020. As a reminder, we adjust the IBNR reserve as we reestimate the number of loans whose borrowers had missed a payment, but that had not yet been reported to us as delinquent.

Of the 53,000 loans in our delinquency inventory at quarter end, approximately 61% or 32,200 loans were reported to us to be in forbearance. Based on the information reported to us, we estimate that the majority of the loans in forbearance at quarter end will reach the end of their forbearance term in the later part of 2021. More specifically, we estimate that more than 60% of the loans in forbearance at quarter end will reach their 12-month anniversary of being in forbearance in the second quarter of 2021, although we expect some of those plans will be extended, either for three months or six months.

While we continue to see loans exit forbearance without a claim payment, future economic conditions, including unemployment and home prices will impact the ultimate outcome of the remaining loans in forbearance. Although it is uncertain how the current delinquency inventory will be resolved, I am pleased that the favorable delinquency and cure activity has continued through April and that the downside earnings and capital risk has been materially less than from what it was at the end of the second quarter last year.

The number of claims received in the quarter remained very low, and were down nearly 64% from the same period last year due to the various foreclosure and eviction moratoriums. Primary paid claims declined to just under $12 million and consist of primarily of short sales and deeds in lieu of foreclosure. At some point, the foreclosure moratoriums will expire. However, we expect claim payments to remain modest for several quarters after they expire because on average, it takes approximately 18 months to complete a foreclosure should that become necessary.

Moving on to operating expenses. During the first quarter, they totaled $51 million compared to $45 million in the same period last year. Last quarter, we informed you that we have been making and plan to make further investments in our infrastructure to realize the value that comes with improved data, analytics and operating improvements of an increasingly digitized mortgage finance industry. While the rate of spend to date is a bit lower than the guidance we previously provided, I do expect the rate of investment to increase in the coming quarters and that the full year underwriting and other expenses will still be in the range of $220 million to $225 million, but more likely toward the lower end of that range.

Reflecting our current debt outstanding, interest expense was $18 million in the quarter compared to $13 million in the same period last year. Assuming no additional transactions, the annual debt service cost will be approximately $70 million. We had approximately $800 million of cash and investments at the holding company as of March 31, 2021. At the most recent Board meeting, the holding company Board approved a cash dividend of $0.06 per share payable on May 27. Any future common stock dividends will also be determined in consultation with the Board.

We continue to believe that our balanced approach in maintaining a strong balance sheet, which includes the use of forward commitment quota share treaties, by accessing the capital markets for excess of loss reinsurance via ILN transactions, provides the most flexibility to maximize the long-term value of both the operating company and holding company, whether by writing more primary mortgage insurance, pursuing new business opportunities, retiring debt, paying dividends or repurchasing stock. At quarter end, our consolidated cash and investments totaled $7 billion, including the cash and investments at the holding company.

The consolidated investment portfolio had a mix of 84% taxable, 16% tax-exempt securities, a pre-tax yield of 2.5% and a duration of four-and-a-half years, primarily reflecting the interest rate movements in the quarter. The net unrealized gain declined to $226 million at March 31, 2021, compared to $345 million at year-end. Shifting to the financial requirements of the private mortgage insurer eligibility requirements, or PMIERs of the GSEs. MGIC's available assets totaled approximately $5.5 billion, resulting in a $2.3 billion excess over the minimum required assets of $3.2 billion, and a PMIERs sufficiency ratio of 169%, as Tim said.

The $3.2 billion of minimum required assets at the end of the first quarter reflects a 70% reduction for loans in a COVID-19-related forbearance plan as allowed under the PMIERS. This provided an approximately $620 million of PMIER's relief net of reinsurance. This excess of available assets over minimum required assets grew by approximately $500 million in the quarter as a result of the $360 million reduction in required assets associated with the ILN transaction that closed in February and approximately $200 million in available assets generated organically through our results of operations, partially offset by the increase in required assets to support the increase in risk in force in the first quarter.

In summary, we remain encouraged that as the economy continues to recover, favorable trends in credit performance and in the housing market will continue. We feel we are well positioned to capitalize on the market opportunities that a robust housing market should make available to us, given our strong market presence, a growing in force book of business that is currently generating a low level of delinquencies, a comprehensive reinsurance program and the quality of new business being written.

With that, let me turn it back to Tim.

Tim Mattke -- Chief Executive Officer

Thanks, Nathan. Before moving to questions, let me address a few additional topics. There continues to be a lot of activity in housing policy circles, but meaningful progress is slow. This could be in part due to the fact that the housing finance system, while could be improved, is operating relatively efficiently and providing critical support to the economic recovery.

As widely expected, it appears that the new administration is focusing its policy efforts and continued loss mitigation efforts for homeowners impacted by COVID-19 and ensuring a successful economic recovery rather than large-scale changes to housing, finance, infrastructure or policy. To date, we are not aware of any policy initiatives that will provide new challenges to our company or industry.

Meanwhile, we will continue to advocate for the increased use of private mortgage insurance and the housing finance industry in order to reduce taxpayer exposure to housing, while still maintaining a resilient housing finance system. Long term, I remain encouraged about the future role that our company and industry can play in housing finance and believe that other regulators and policymakers share a similar view. The COVID-19 pandemic reminded all participants that some market options for credit enhancement can be scarce or unavailable at various points in the economic cycle.

While our company and industry are organized solely to provide credit enhancement solutions to lenders, borrowers in the GSEs in all economic cycles, not only does private mortgage insurance offer dedicated capital day in and day out to the housing industry and offers many solutions and a great value proposition for lenders and consumers to overcome the number one barrier to homeownership, the down payment.

As I mentioned at the beginning of my remarks, we are focused on continuing to provide critical support to the current housing market, especially low- and moderate-income and first-time homebuyers. Currently, we are writing high levels of new insurance and are experiencing decreasing levels of delinquencies, both duly reported and open inventory. We have a book of business that has strong underlying credit characteristics and is supported by a balance sheet that has a low debt-to-capital ratio, an investment portfolio of nearly $7 billion, contractual premium flow and a robust reinsurance program.

I am confident in our positioning in this market, and we like the risk-reward equation that the current conditions offer. We have the right team in place to build off our solid foundation to continue to deliver competitive offerings and best-in-class service to our customers and generate strong returns for our shareholders.

With that, operator, let's take questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Mark DeVries of Barclays. Please ask your question.

Mark DeVries -- Barclays -- Analyst

Yeah. Thank you. I was hoping you could give us a sense of why you think insurance in force grew so much in April. What you're seeing in terms of pricing? And whether you think any pricing adjustments might have impacted kind of your -- the business you wrote in April?

Tim Mattke -- Chief Executive Officer

Mark, it's Tim. I guess it's tough to know exactly what the overall size of the April market is. I think we continue to be encouraged that home purchase volume seems to remain strong even though, as we've talked about in the comments, that refi activity seems to be slowing down, at least for mortgage insurers. But I think it's really -- as home purchases remain strong, I think interest rates are still very attractive for homebuyers. And so for the most part, I think we're chalking it up to that is that there's still a lot of tailwinds from that standpoint.

Mark DeVries -- Barclays -- Analyst

Okay. And you're not seeing any signs that pricing has kind of shifted in a way that might be moving business toward you this month?

Tim Mattke -- Chief Executive Officer

I mean not that I would point to. I think it's more that from a purchase, we're getting into the time of the year where that's strong. And we think interest rates, even though some headlines will say that interest rates are going up and making things less affordable, we still think that it's attractive interest rate for a lot of would-be homebuyers.

Michael J. Zimmerman -- Investor Media Contact

Yes. Mark, this is Mike. Just a reminder for us to -- a reminder that the NIW, right, is clearly a trailing indicator. So that's coming from that applications and activity from -- in April. That's coming from February and March. And then that gets closed and recognized and put on our books. So you kind of think about that rates were just starting to move up, and we had some volatility in rates at that point as well. So just another point on top of what Tim had said.

Mark DeVries -- Barclays -- Analyst

Got it. And then on a separate topic, I mean Nathan alluded to the fact that, I guess, 60% of borrowers in forbearance are coming up on kind of the scheduled end of their forbearance periods, but did you expect some borrowers will have that extended? Could you talk a little bit more about that, kind of what your expectations are, what you're hearing out of Washington? And if they don't, kind of what's your strategy for those loans going forward?

Nathan Colson -- Executive Vice President and Chief Financial Officer

Sure, Mark. It's Nathan. I think with the GSEs extending the forbearance period up to 18 months for most of the borrowers that are in forbearance, those that we're in, I think it was at the end of February, it doesn't seem like there's going to be a lot of borrowers that follow a path where they exit forbearance after 12 months and enter foreclosure, partly due to the moratoriums and partly due to the option to extend out to 18 months.

So we don't think that we're going to see a lot of borrowers exiting forbearance in kind of negative outcomes in the near term. And that if borrowers are going to exit forbearance and enter foreclosure, that's likely pushed out toward the end of the year at this point.

Mark DeVries -- Barclays -- Analyst

Okay. And are you having conversations with servicers all about kind of what their approach will be there, whether it's start to do things like these in lieu? Or I assume that the first effort will be to try and restructure the mortgage and get to a payment that the borrower can make?

Michael J. Zimmerman -- Investor Media Contact

Hey, Mark. It's Mike again. So yes, I mean, absolutely, we engage the servicers. We participate in the housing policy council. And clearly, there's a lot of news, too, with the CFPB looking at from a borrower perspective, is getting more active and involved in reviews. So what servicers' strategies will be, I think, will be the same tried and true traditional strategies that they've always used to do loss mitigation, clearly, with new tools here, primarily the deferral option within the forbearance arrangement more formalized, I should say too, that was always somewhat available.

So I think it's too early to tell what exact strategy would be. But your comment on these in lieu that's kind of what's happening now. When you look at our pace, it's these in lieus, it's short sales, it's nonforeclosure activity. So those activities are taking place where the borrower thinks that makes the most sense for them, and the outcome is best for everybody, quite frankly, at that point in time. Hopefully...

Mark DeVries -- Barclays -- Analyst

Great. Thank you.

Operator

Our next question is from Bose George of KBW. Please ask your question.

Bose George -- KBW -- Analyst

Yeah. Good morning. I just wanted to follow up on the sort of the pricing-related question. There's obviously been movements in market share among your peers this quarter. You guys felt fairly stable. Just wanted to get your thoughts on competition and pricing in the market. And specifically, do you think that price increases post COVID have been given back as the credit outlook has improved?

Tim Mattke -- Chief Executive Officer

Yes. Bose, it's tough to say, obviously, where everybody else is. It's a competitive marketplace. I think we view it as a very attractive risk-reward. I think, generally, it's safe to say the concerns that people had at onset of COVID, those have probably dissipated in the industry from a sort of thinking about the risk and how to price. So I think it's safe to think about it in that term. To think about what happened with market share with other participants, that's tough for us to speculate on, obviously.

But we're very happy with the capital we were able to deploy this last quarter. It felt like we're getting really strong returns and continued that this quarter as well. And so we're, again, looking forward to the remainder of the year.

Bose George -- KBW -- Analyst

Okay. Fair enough. That's good. So it's safe to say that you're seeing returns consistent with your hurdles, there was no change this quarter given what was going on in the market?

Tim Mattke -- Chief Executive Officer

Yes. I think it's safe to say that we are getting returns that are at or exceed our hurdle rates. And again, view it as a very good market to be participating in.

Bose George -- KBW -- Analyst

Okay. Great. Thanks. And then just one on capital return. I mean you guys obviously have a lot of excess at the holding company. How are you thinking about potential capital returns there, while the FHFA has this constraint on dividends up to the HoldCo, but you obviously have a lot of flexibility with the cash that's already there?

Nathan Colson -- Executive Vice President and Chief Financial Officer

Yes. Bose, this is Nathan. It's a good question, something that we obviously spend a lot of time talking about. We have continued to pay the shareholder dividend as a form of capital return through this period. We do have about $800 million at the holding company. So I think we have options. But what we said last quarter, and I think it's still true is that meaningful capital return, given the scale of our business really can't start until dividends from the operating companies start again.

So while we continue to evaluate these things, I'd be more focused on what happens after the GSE kind of -- the expiration of the GSE temporary rule that requires their approval. I think we've had really constructive conversations with our regulator and a lot of conversations internally as well about how we want to approach that going forward and continue to view that as really the thing that's going to drive kind of our capital return plan longer term. So don't have, I guess, a lot more to guide on today.

Bose George -- KBW -- Analyst

Okay, great. Makes sense, thanks.

Operator

Our next question is from Doug Harter of Credit Suisse. Please ask your question.

Doug Harter -- Credit Suisse -- Analyst

Thanks. You guys mentioned you expect premium yields to continue to drift lower. Any sense as to how long until we kind of bottom out and kind of reach the new equilibrium?

Nathan Colson -- Executive Vice President and Chief Financial Officer

It's Nathan. It's a good question. Again, I'd kind of point you to the direct in force portfolio yield as opposed to the net yield, which I do think can move around for other reasons. It's been coming down about one basis point a quarter over the last several quarters. I think that run rate seems like a pretty good thought for the remainder of 2021. But again, that's going to be influenced by the level of refinance activity. I think we've been repricing a little bit faster in this environment with how much has been running off and how much has been coming on.

So if we end up in an environment where the refinance activity is much lower, I think that would serve, all else equal, to slow that pace. And if we continue in a very high refinance environment, continue to see that pace. Beyond 2021, over the next several quarters, I think there's just probably too many factors that could influence it to try to provide kind of longer-term guidance there.

Doug Harter -- Credit Suisse -- Analyst

Understood. Thanks, Nathan.

Operator

Our next question is from Phil Stefano of Deutsche Bank. Your line is open.

Phil Stefano -- Deutsche Bank -- Analyst

Yeah. Thanks and good morning. Hopefully, a quick geography question for you. The IBNR adjustment that was done, the -- where does that show up? Is it in the current period or prior period loss provisioning?

Nathan Colson -- Executive Vice President and Chief Financial Officer

That's in the current period.

Phil Stefano -- Deutsche Bank -- Analyst

Okay. Thank you. And so, Nathan, you had talked about expenses, and I appreciate kind of the updated thoughts around that. As we look at the path toward the '20 to '25, I mean, is that sequential uptick throughout the year? And how should we think about what the fourth quarter number is? I mean is that an exit run rate that we should contemplate for forward quarters? I think is this just inherently the digitization is more expensive from an operating perspective to run this business or is there some kind of catch-up in 2021 and maybe the expenses have a tick down as we contemplate 2022 and beyond?

Nathan Colson -- Executive Vice President and Chief Financial Officer

Yes. Good question. I don't view the -- there being kind of necessarily any kind of seasonality or direct upward path or any bulge, I would say, in expenses quarterly over 2021. So we're a little bit lower than that run rate guidance, but not a lot lower, I mean. So I think what we are saying is we do think that in the second, third and fourth quarters, in aggregate, will be a little bit higher than the average that we had in the first quarter.

But in terms of the longer term, I think what we talked about last quarter was a lot of this investment is to gain increased efficiencies as well. And we're going to start to see some of those efficiencies coming online, even in the, say, the back half of this year. They might be masked in the near term by the incremental investment. But I don't think that where we end up in, let's say, the fourth quarter is the new long-term run rate. That's certainly not the way that we entered this kind of investment with that in mind.

Phil Stefano -- Deutsche Bank -- Analyst

Okay. Okay. That makes sense. And then just one more, I don't know, philosophical question. As we think about these in lieu in short sales versus the strength that we have in the broader housing market. I mean is there opportunity in here to acquire the property and just sell it at a gain given the optionality that you have in the MI policies? Or can you be more aggressive if you want to in this market? Does it make sense just given what the strength we have in the broader housing market and home price appreciation?

Michael J. Zimmerman -- Investor Media Contact

Hey, Phil. Mike here. So you're right, we always have the option to acquire the property. It's somewhat counterintuitive when the markets are strong, even though we have that opportunity. Then you see others bidding -- outbidding us because we're looking to cover -- basically mitigate our loss in a maximum loan possible, not necessarily make a gain on the sale of the property to reduce it to, if you will, a negative loss, for lack of a better way to describe it. So yes, we see opportunities there, but very little and plus the number is so small. I mean it just doesn't make sense to be more aggressive to, I'll say, turn it into a profit center.

Phil Stefano -- Deutsche Bank -- Analyst

I'm just curious. Thank you so much.

Operator

Our next question is from Ryan Gilbert of BTIG. Please ask your question.

Ryan Gilbert -- BTIG -- Analyst

Hi. Thanks, guys. I jumped on a little late, so sorry if you addressed this. But just going back to the April insurance in force growth. It sounded like in response to a previous question, the improvement in April IIF was really driven by stronger NIW growth and less so from declining cancellations. Is that the right way to think about it? Or did you see a pickup in persistency in April?

Michael J. Zimmerman -- Investor Media Contact

Yes. Look, persistency, I don't think picked up in April, I mean, given the rate environment. So it's really a function of the market opportunity that was out there. And again, this is -- the April NIW is really reflective of that February and March -- early March activity. Think of it that way, where rates were just beginning to kind of bounce up to maybe get above 3% before they started retreating again. So I think it's just more natural and organic from the overall market opportunity perspective.

Ryan Gilbert -- BTIG -- Analyst

Okay. Got it. Thanks. Second question is on premium yield, I guess, on the direct premium yield. Do you think once the pre-2018 book fully runs off, we'll continue to see reductions in the premium yield? Or do you think that yield kind of stabilizes?

Nathan Colson -- Executive Vice President and Chief Financial Officer

Ryan, it's Nathan. I mean I would say our experience has been that those books never fully run off. There's -- these things have a very long tail to them. But even if you kind of generalize and say that those are primarily having runoff, I mean certainly, the reason why the yield has trended down is that the newer policies have been written with kind of a better risk profile than the average in force that we had previously and also at lower premium rates.

Once it's -- the in force contains only that, then the in force yield will kind of mirror that. So I think mathematically, what you're saying is correct. But again, kind of looking at it beyond -- at least from our perspective, looking at it beyond 2021, there's just a few too many moving parts to do it with any certainty.

Ryan Gilbert -- BTIG -- Analyst

Okay, got it. Thank you very much.

Operator

Our next question is from Mihir Bhatia of Bank of America. Please ask your question.

Mihir Bhatia -- Bank of America -- Analyst

Hi. Good morning and thank you for taking my question. I just had one quick one. I just wanted to ask about the -- and I apologize if I missed it, if you all addressed this already, too. But I wanted to ask about the April delinquency and the delinquent inventory declining so much. Is there something to -- I guess the question is like, was there something particularly unusual about that time period because of the foreclosure expiry and then getting extended?

Or should -- or do you think that April is indicative of what the kind of improvement we could see for the next two, three months because I imagine there's a lot of loans coming up in the 12 -- reaching that 12-month mark in the next few months? Thank you.

Michael J. Zimmerman -- Investor Media Contact

Hey, Mihir. It's Mike. So I mean, remember right, we -- seasonality does still play a role in credit, new notices and cures. And regardless of the economic environment, whether it's certainly strong economic environment or a weak economic environment, you always see seasonality in the beginning part of the year. And I think that's -- clearly, that's an influencer of it. How much of it is seasonality versus, I'll call it, organic reentry, people moving back, that's a little harder to parse out at this time. So -- but seasonality, I think, has -- when we look at it sequentially, month-over-month, I think you got to keep that in mind as well.

Mihir Bhatia -- Bank of America -- Analyst

Got it. Okay, thank you.

Operator

There are no further questions on queue, presenters, you may continue.

Michael J. Zimmerman -- Investor Media Contact

Okay. Again, I want to thank everyone for their interest and their questions. Another great quarter financially, and I hope everyone is staying happy and healthy as we move through COVID-19. But again, thank you for your interest in MGIC Investment Corp.

Operator

[Operator Closing Remarks]

Duration: 37 minutes

Call participants:

Michael J. Zimmerman -- Investor Media Contact

Tim Mattke -- Chief Executive Officer

Nathan Colson -- Executive Vice President and Chief Financial Officer

Mark DeVries -- Barclays -- Analyst

Bose George -- KBW -- Analyst

Doug Harter -- Credit Suisse -- Analyst

Phil Stefano -- Deutsche Bank -- Analyst

Ryan Gilbert -- BTIG -- Analyst

Mihir Bhatia -- Bank of America -- Analyst

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