MGIC Investment Corp (MTG) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MGIC Investment Corporation third-quarter earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mike Zimmerman, Senior Vice President, Investor Relations. Please go ahead.

Thanks, Kate. 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 third quarter of 2014 are Chairman and CEO, Curt Culver; President and COO, Pat Sinks; Executive Vice President and CFO, Tim Mattke, Executive Vice President of Risk Management, Larry Pierzchalski.

I'd like to remind all participants that our earnings release of this morning, which may be accessed on our website, which is located at MTG. MGIC.com under investor information, includes additional information about the Company's quarterly results that we will refer to during the call and includes certain non-GAAP financial measures. As we have indicated in this morning's press release, we have posted on our website the supplemental information containing characteristics of our primary risk in force and new insurance [risks], which we think you will find valuable.

During the course of this call, we may make comments about our expectations of the future, which may include statements regarding the potential impact of the draft GSE mortgage insurance eligibility requirement or alternatives MGIC could pursue, were these draft GSE mortgage insurance alternative eligibility requirements implemented in their current form.

Actual results could differ materially from those contained in these forward-looking statements. Additional information about those factors that could cause actual results to differ materially from those discussed on the call are contained in the Form 8-K that was filed earlier today. 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 parties 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 8-K.

With that, I will turn the call over to Curt.

Thanks, Mike. Good morning. I'm pleased to report that in the third quarter we reported net income of $72 million, or $0.18 a share, versus net income of $12 million, or $0.04 a share, for the same period last year. The improvement in quarterly financial results was driven primarily by a lower level of incurred losses, which totaled $115 million compared to $180 million last year.

There were multiple influences on the incurred losses. First, we received 17% fewer delinquency notices than the same period last year. Second, we continued to see improved cure rates on these notices. And finally, we experienced positive developments on previously received notices. We believe the positive development and improvement in our cure rate assumptions are attributable to the slow but steady improvement in housing and employment.

Further contributing to the positive credit performance is the fact that the books written after 2008 and the loans that took advantage of HARP, which in total now account for more than 64% of our insurance in force, continue to generate extremely low levels of delinquencies. The delinquent inventory ended the quarter down 26% year over year and down 2.6% sequentially, ending at 83,154 loans. We expect to see the inventory continue to decline for the remainder of 2014.

In the quarter, we wrote $10.4 billion of new business, which was up 25% from the second quarter and up 21% when compared to the third quarter of 2013. Our year-to-date new business is up 3% over last year despite the overall origination volume being lower. Our 30-year mortgage rates remain affordable, and as a result the purchase market remains reasonably strong.

Since purchase transactions, which accounted for nearly 90% of our new writings during the quarter, tend to use mortgage insurance more than refinance transactions, our purchased application volume remains strong. Year to date when compared to last year, our purchased application volume is approximately 27% higher, while total applications are 4% higher.

Given the volume we have written to date and the applications in process, we expect to write approximately the same or slightly higher volume of business in 2014 than we did last year.

While third-quarter numbers are not yet available, we estimate that our industry's market share for the third quarter was approximately 14% to 15%, as more business shifts to the private market and away from the FHA, given the value proposition we offer. Within the industry, our industry, we believe that we maintained the market share gains we realized over last year and estimate that our quarterly market share is approximately 20%.

As a result of the increased levels of new insurance written and higher persistency, insurance in force increased 2% in the quarter to end at $162.4 billion. At quarter end, approximately 59% of our insurance in force was covered by reinsurance transactions, which had the effect of reducing net income by approximately $11 million.

Paid claims in the third quarter were $263 million, down 36% from the same period last year and down 12% from the last quarter. Claims received in the quarter continued to decline and were down 35% from the same period last year and down 7% quarter to quarter. Given the claim filing patterns we are experiencing, we continue to expect paid losses to trend modestly lower for the balance of the year. At quarter end, cash and investments totaled $4.9 billion, including $517 million of cash and investments at the holding company. Our total annual interest expense is approximately $66 million, and our next scheduled debt maturity is $62 million, due in November 2015.

During the quarter, we received a deficiency letter from the IRS that we have been waiting on since last year regarding the tax dispute we have with the IRS. In 2007, we paid and reflected in our financial statements $65 million related to the assessment. As we have previously disclosed, our plan is to take this matter to litigation in tax court, which could take several years to resolve. Importantly, receiving this letter or commencing litigation does not impact our view of capital needs for the Company, the amount of cash available at the holding company or our ability to comply with PMIERs.

Speaking of PMIERs, the comment period for the draft private mortgage insurance eligibility requirements closed September 8. We currently expect these rules to be finalized and published by the end of the year. As we discussed last quarter, MGIC embraces robust, risk-adjusted capital requirements and supports the goal of modernizing the GSE's mortgage insurance eligibility requirements.

However, we believe this modernization should result in a system that reduces taxpayer risk and provides incentives for private capital to play a larger role in ensuring that creditworthy borrowers have access to mortgage credit at a reasonable cost. The main theme of our comment letter was balance. By that, I mean it's important that the capital rules provide the GSEs with strong counterparties and apply a risk-based methodology.

But they should also be established in a manner that will help achieve the public policy goals of expanding access to credit for creditworthy borrowers, decreasing the government's footprint in housing and reducing taxpayer exposure by encouraging private capital to take a first-loss position on residential mortgage credit.

We believe that the adjustments we are recommending, specifically the inclusion of future premiums in the calculation of available assets with appropriate limitations, the inclusion of a seasoning factor in determining the level of the available assets required to be held for insured loans, and the improved transparency around the administration of the PMIERs can be achieved within the timeframe currently being considered. So there should be no worries that there would be a needless delay with implementing the strength and counterparty financial requirements.

In addition to the comment letter from MGIC and the other MIs, the FHFA also received comment letters from many other groups that participate in housing finance, including the MBA, the builders, the realtors, community groups, lenders, mortgage research firms and investors. With varying degrees of detail and reference, I would say all of the comments were supportive of private mortgage insurance and reiterated that balance is important.

If implemented as drafted, that is, without consideration for the balance MGIC and others recommend and despite MGIC's risk-to-capital ratio of 15 to 1, our return to annual profitability, and assuming full credit for the current reinsurance agreement, we estimated earlier this year and reported this out that MGIC would have a shortfall in required assets of approximately $600 million at year-end 2014, falling to $300 million by the end of 2016. This is, of course, before we take any proactive steps to address this issue.

However, we believe that the combination of internal resources, additional reinsurance and, if needed, non-dilutive capital would enable MGIC to mitigate this estimated shortfall and comply fully with the PMIERs' requirements. If there is no modification for the proposed PMIERs, then the amount of capital required will increase.

However, it is important to note that after considering reinsurance we still will be able to maintain mid-teens returns on the current mix of business we are writing, given the underwriting quality and pricing terms being offered.

Further, we would hope that as a result of the increase in counterparty strength post PMIERs, the GSEs would lower the loan level price adjustment they charge and begin to seriously consider transferring more risk to the MIs either in the form of deeper coverage on above-80% LTVs or seeking insurance on loans below 80% LTV, all of which our Company and industry would benefit from.

On a related topic, the review and updating of state capital standards by the NAIC, which the Wisconsin insurance regulator is leading, continues to move forward, although we are not aware of a timeframe for implementation. We do not expect the revised state capital standards to be more restrictive than the financial requirements of the draft PMIERs.

The debate over housing policy and market structure, including the role the FHA and GSEs would play, continues with seemingly no end in sight. So the current market framework is what we will be dealing with, as I have no reason to believe there will be in a definitive action by Congress for a considerable period of time.

In closing, during the quarter we continue to make progress on the path toward sustained profitability. We wrote $10.4 billion of high-quality business. The in-force portfolio is once again growing. The level of delinquencies and claim payments continues to fall. MGIC's risk-to-capital ratio improved to 15 to 1. Our industry market share is improving. MGIC's market share continues strong within our industry, and we maintained our traditional low expense ratio.

So as a result, I feel our Company is in an excellent position to take advantage of the opportunities being created today, but more importantly is positioned for future growth as the economy improves and household formations return to historic levels.

With that, operator, let's take questions.

(Operator Instructions) Bose George, KBW.

How does that positive development help the losses incurred line item? Could you just quantify the impact?

Sure. This is Tim speaking. The positive impact for the reserve development was about $30 million in the quarter. So for the new notices, we continue to see the decrease in the new notice activity. We continue to see improvements, especially year over year, on the cure rate of those new notices. We are probably just slightly better than 15% expected claim rate on those new notices at this point. And then the development, like I said, about $30 million of favorable development in the quarter.

Okay, perfect. Thanks. And then it looks like your single-premium percentage increased by about 2.5% quarter over quarter. Was that just a blip? Or is anything there more compelling than it was last quarter?

We had a lender of ours increase our share of lender-paid mortgage insurance. So it's a result of a relationship with a lender during the quarter.

Okay, great. And then just one on PMIERs. I think you guys noted at a recent presentation that, in terms of the PMIER shortfall, about 2/3 of that can be met through capital in-house, assumes like the $100 million affiliated plus the whole coke capital. Can you just go over how much you would need externally versus in-house if the $300 million is the shortfall?

Well, I think -- Tim speaking again. $300 million is the shortfall. I think we've talked about, as you said, $100 million probably internally from subsidiary SPs where we think there's available at least a good amount of available cash that could be dividended to MGIC that would then count in the PMIERs. So that would leave you with $200 million shortfall.

And as we've said before, we've got cash at the holding company. Obviously have debt maturity in the $60 millions coming up in November of 2015 that we have to deal with. So we have ability to do it in-house from the holding company but obviously want to keep an appropriate balance of cash at the holding company along with leading the PMIER requirements.

Okay, great. Thanks.

Eric Beardsley, Goldman Sachs.

Just to follow up on your comment later and how the industry might react if the PMIERs went into place as is, I think you and some others in the industry had suggested that price increases would be necessary. Would you be willing to lead the industry upwards on price if they were to actually go into place as is?

Well, let's see how things play out. If you look at our history, we certainly have done that. And as a leader in the industry, that is the position you take. We did that on captives many years ago and also other price increases.

But I'm still very optimistic relative to the PMIERs being adjusted, relative to the items that I discussed, relative to our own comment later. They make a great deal of sense, and I think a lot of the industry not only as, say, our industry but the MBA, the builders, the realtors, et cetera, rallied around the same chorus regarding its impact on housing. So I really am optimistic relative to the PMIERs being softened.

Back to the pricing issue, again, that's hypothetical. We would have to see the situation at the time. But this Company has no reluctance relative to pricing increases if it's the right thing to do.

Got it. And then just on a potential softening of PMIERs, do you have a sense of which areas will be most likely changed at this point?

Well, I think the area relative to the premiums is an area that has gotten more discussion than any others. Now, how many years of premiums or whatever the limitations on that, we don't know. But I think that is an area that just makes a great deal of common sense for inclusion relative to the mortgage insurers. And I think that's, if you will, number one on the hit list.

The seasoning probably also is being discussed. So I would say the areas that we were more forceful relative to our response are probably getting -- and others are getting the most attention and will also have the most impact relative to the mortgage insurers and their capital levels.

All right. Great. Thank you.

Chris Gamaitoni, Autonomous.

What buckets were the positive developments mostly felt in by delinquency seasoning?

It would be the under -- other 12 months. We didn't really see positive developments that we recorded on the over-12 bucket, so it's going to be in that sort of intermediate bucket, the 4 to 12.

And is the improvement in cure rates the main driver of that?

Yes.

Okay. How do you think about holdco cash in terms of maybe a very long term but maybe at some point in the future tax charge in the (technical difficulty) issue?

Chris, you broke up there a little bit. Could you restate it?

I thought he said tax issue.

How do you think about how much holdco cash you have to retain in case the tax issue doesn't go your way?

Well, I guess that's something from a contingency standpoint that we have to think about. But quite honestly, based upon the history of the tax case, obviously feel pretty comfortable. As we've discussed, we paid amounts related to the investment back in 2007. We reached a tentative settlement with the IRS that was basically in that ballpark. And very hopeful that we can finally reach an agreement with them in that area. So we don't have a large concern that we have to use a large amount of that cash at the holding company for the IRS issue.

Okay. I think that's all my questions. Thank you.

Geoffrey Dunn, Dowling & Partners.

First quarter, yourselves and some of your peers had indicated that, while incidence rates were improving on a year-over-year basis, you expected sequentially that they could get pressured just from normal seasonality. Obviously we are not seeing that happen. I think it actually now is getting better sequentially. What specifically is happening? Is it really just like the cure rate on the 4-to-11 bucket that is outpacing your expectations? Or is there something else that is moving that factor in a different direction sequentially than you expected just a couple quarters ago?

Well, when we look at the 4-to-12 bucket, again, you have to think about it's partially where we put it on the prior quarters that could move us so that we continue to see improvement going downward even in the younger buckets. And that would cause some development potentially to improve on the 4-to-12 bucket.

So I think it's safe to say that even though there hasn't been -- it hasn't been leaps and bounds increase, there continues to be steady improvement on the cure ratios of the under-12 buckets in total, even down to the new notices coming in the door. And we are trying to reflect that in our estimates.

And then just on the optics of the DTA, obviously several quarters of profitability now. Any updated thoughts on when that valuation allowance could be considered to be reversed? And just specifically, just because I think there's a difference here between the cash and the GAAP tax implications, does this IRS thing have anything to do with the DTA and the valuation allowances we're looking at over the next 18 months?

I wouldn't, I guess, relate the tax issue to the DTA. Us being able to bring the DTA back on the books is really related to sustained profitability and our forecast for sustained profitability in the future. And obviously, as we've discussed in the past, there's discussions that we have with our auditors as to when the appropriate time to be able to bring the full asset back on is. And so with us having profitability this year, obviously it makes the likelihood of it being sooner rather than later more likely. But again, I wouldn't necessarily expect it to be a this-year event. And when you think about the tax contingency, I wouldn't think there's anything going on with that being an issue with us being able to bring that deferred tax asset back out again.

Okay. Thanks for the clarification.

Jason Stewart, Compass Point.

Are you sensing any change in the political landscape at HUD under Castro? Or perhaps they are more focused on opening credit to first-time home buyers rather than pulling in private capital?

Mark, this is Pat. Not yet. It's still too early. Carol Galante has announced that she's leaving, and they've got a temporary replacement in place. But they haven't named a permanent one yet. So we don't have any sense of that.

We know that the FHA is under a lot of pressure to reduce their premiums. Thus far, they have stuck to their guns, saying they are adequately priced. They are going to have a new actuarial report that will come out here in November. And that may show. Oh, I don't know if it will get to the 2% minimum capital. But if it shows better, then they may well be under even more pressure in 2015 to reduce premiums.

That said, we, the private mortgage insurers, continue to be in better execution to the borrowers in just about every cell in the high LTV space.

Have you quantified how much the premiums would have to come down for it to really have any impact on what you are doing today in terms of NAW?

Jason, this is Mike Zimmerman. No. We can -- we can do that math, and we haven't done that. But it has to be a fairly considerable amount, given the way the structure of how much of the upfront is an ongoing.

As an example, they want to introduce this HAWK program, which ties borrower counseling to a reduction in premiums. And I think they were talking about 10- or 15-bip reduction. As I said earlier, we are a better execution. That would make us -- we would still be a better execution if they were to drop premiums in that range.

We have a tremendous price advantage at the higher FICOs in particular. So it would have to be an unwarranted, I think, price reduction on FHA that they be competitive in that space. And I'm also very hopeful, as I mentioned earlier, that as these counterparty PMIERs go into effect relative to the GSEs and the protection our industry provides, that there is a serious look at the loan-level price adjustments the GSEs charge and make our product, if you will, a conventional mortgage, even more competitive. So I'm very optimistic relative to that also.

Okay. That's helpful. Thank you. And then on the -- I missed part of the answer on the lender-paid market share. It sounded like you said that you had gotten more share from a single lender in the single space. Was there any price change associated with that, or was that just somebody shifting market share around?

It was a customized rate guard for a lender that wanted pricing little different than our standard rate guard. So I wouldn't say it was a price reduction; it was just a change in pricing relative to a multiple of different FICOs, some going up, some going down.

Got it. Thanks for taking the questions.

Jack Micenko, SIG.

Your NIW trends on a percentage basis were pretty strong in the third quarter relative to the other MIs we track. Was that all attributable to this single-pay relationship, or did you add incremental customers? Is there anything else you can point to there that drove some of your above-average growth?

This is Pat. We weren't adding customers, per se, because we do business with just about everybody. I think it's just a better execution. We've got a pretty fired-up sales organization. We've grown our share more than 3 points since the second quarter of last year. So it wasn't one particular event that drove share.

In addition to that, as we've seen changes in movements within the top 20 or so originators in the country, we do pretty well at a lot of those customers. We might not do the best at the very top three or four or five. But as others, midsized players become bigger, we do pretty well there. We gain share, the point being as they do better, we do better.

This is Curt. I'd just like to reiterate on that point also that, as Pat mentioned, I know some of our competitors keep track of customers as they add them. We are already doing business with all of them. The reality is, it's just how much more business can we get from them.

And I think what you've seen in the quarter was the smaller or the community banks and others, other than the top 10 lenders, getting more market share. And MGIC, frankly, does much better with the smaller lending institutions. And as result of that, I think our customer base, if you will, the mortgage lender customer base, the ones that do more business with MGIC, improved their share in the quarter, which was very helpful relative to our own market share.

Okay, that makes sense, particularly with Wells' share coming in a little bit yesterday. I guess, asking Jason's question a different way, in our math over like a five-year period on current 747-60 FICO it looks like, correct me if I'm wrong, maybe 20%, 25% cheaper than FHA, all in. Am I in the right neighborhood on that, or am I missing something there? Can you just opine on that differential?

Jack, this is Mike. No, I think that's in the right area. You are looking at about a $100 a month differential or better than the FHA. So if you look at it from a (inaudible) all-in payment or just the insurance versus the insurance, I think you are in the right area.

Okay. And then just one last thing. I don't know if you have talked to the FHFA PMIERs. There's a little bit of chatter that we might get the final draft pushed into January. I don't think it would be surprising to anybody. But have you heard anything specific on that front?

We have not.

Okay, thanks for the questions -- taking the questions.

Seth Glasser, Decade Capital.

Maybe this is something I should already know, but I wanted to actually ask you about the statutory DTA. What do you think the timing is for the process of this to start being readmitted? And then am I correct to assume that readmitting that would not actually impact the liquid asset calculation because it would be non-cash? Would that be a correct way to think about it?

On your second point, yes. It would not be -- from a PMIER credit perspective, we do not get any credit for a deferred tax asset. To your point as far as readmitting it, we actually do have some portion of our deferred tax asset on our statutory book. But under statutory accounting, it's limited right now to 10% of our surplus. So it's not the full DTA that's on our books at this point. But as our surplus increases, we will also get, I guess, a 10% extra benefit because we will get to admit that much more of a deferred tax asset. But to your last point, that would not get us any additional credit under the PMIERs.

Right. So it's sort of become almost an issue that doesn't really matter a whole lot because under a non-risk-to-capital type calculation it's not really going to create any or provide any benefit.

It won't provide benefit for a PMIER calculation from a statutory capital. Under a state regulation, it still provides benefit.

Got it. Okay. Thank you very much.

Douglas Harter, Credit Suisse.

I was just hoping you could provide me a little history as to why the initial settlement you had with the IRS broke down. And along those lines, what gives you the confidence that you will be able to reach a settlement like you indicated?

Well, as I mentioned, we thought we had reached an agreement. That went to a joint committee on tax --

We actually did reach an agreement.

We did reach an agreement with the IRS themselves that went to the joint committee on taxation, and that was not recommended to be approved at that level. Our understanding is that at this point the IRS did not go through with the deal. But we have no reason to believe that the review would be any different at this point. And so that's why we still remain confident that we will be able to resolve the issue for the area where we had settled it with them the first time.

Would it need that level of approval again? And could the deal -- if you reached another deal with the IRS, could that rate break down again? I guess I was just trying to understand why it would be -- or how or why it would be different.

That is a possibility. But again, we have conversations with the IRS. It did not move quickly, obviously. As we said, we have been waiting a year for the letter. It has the possibility, if we reach another deal, to go back to the joint committee. There's no guarantee that that would be approved there. But again, based upon our starting position, we still think that we are in an appropriate position from an accrual standpoint, and that that's where we all end up with the dispute.

And obviously, we feel the arguments are on our side. And I think both sides are motivated more so than they were -- what year was that? 2007 -- 2006?

2010 was the settlement (multiple speakers).

So I think there's more of an incentive to get it done on their part. So we will see what happens.

Great. Thank you for that color.

Matt Howlett, UBS.

Is there any way you could just elaborate on some of the deeper MI coverage potential, the below-ADLTV, maybe even possible could we see pool insurance come back? Is this all in conjunction with the GSEs and their mandate to offload risk? We have seen the staggered transactions really triple in size in the last year. Is there talk with the mortgage insurance industry in terms of offloading credit risk via insurance contracts?

This is Pat. There's a lot of discussion around deeper-cover MI, that being particularly being advocated by the MBA and the MI industry, as a way to bring more private capital into the equation and reduce the size of the GSE footprint, thus taxpayer exposure. So a lot of talk about that.

I think the resolution of PMIERs will go a long way towards bringing greater credence to that argument. The MIs just introduced a new master policy effective October 1. So we've got greater clarity around the coverage we provide. I think the new capital or the new PMIERs will provide greater clarity around capital, and thus we will be able to make that argument in a more forceful way.

The other part of the discussion is providing private mortgage insurance on LTVs below 80s. And we are also having those kind of discussions, and I would expect to have those well into 2015.

[Would it be] along the way of pool insurance wrapping -- sort of the old modified pool?

It may be. A lot of that will depend on capital requirements. In the past, pool is -- the capital requirements on pool have been quite punitive. But you could see -- if you want to use the word pool, I would substitute maybe structured. You could see some structured transactions. You could perhaps see some reinsurance. I think all of those are possibilities and greater possibilities once PMIERs gets resolved.

Yes. I think you would see them more in the line of individual loan coverage down to 60% rather than 80% or whatever the case may be. That works very well, and I think would go a long way from the lenders' standpoint in justifying reduced guarantee fees or, again, back to the loan-level price adjustments, if they had deeper MI. And that would be a better execution than what they do with the GSEs, paying those fees.

So I think there's strong incentives both from the GSE's standpoint in getting the deeper coverage from the taxpayers' standpoint and limiting risk to the government and, from a borrower standpoint, lowering their costs. So I think, again back to the arguments are on our side. It's just a matter of getting an audience to buy into those.

Yes, exactly. And then just, I guess, a bigger question in terms of the overall balance sheet, how you look at long-term, where you want to direct that towards. But there's a lot of work you could do, clearly, with some of the convertibles. What could you -- are you waiting for the state cap rules to get finalized or the PMIERs before tackling that issue?

Well, we definitely want to get the PMIERs finalized. It would be nice to have a sense of where the state rules are going to be. But I think it's safe to say that we think that those requirements would be inside of, at least, where the PMIERs are right now. So I don't think we'd have to wait until the state rules are fully finalized as there's no timetable set on that at this point.

But the PMIERs being finalized goes a long way towards understanding what we need to have at the writing company and what we might be able to do at the holding company in relation to our convertibles and their outstanding debt.

Has there been any conversation with the rating agencies? Do they even come into play at this point?

Well, we continuously talk to the rating agencies. I think they are also waiting to see where the PMIER requirements are. And obviously they are focused on our profitability on a GAAP basis as well. And once we get, I think, past those issues, then it starts to become more about holding company structure.

And the rating agencies will have more impact as private securitizations -- whatever they may come about again relative to the debt because dealing with the GSEs, and them, it's not relevant because they do their own work. But as private securitizations start to blossom in the marketplace, I think the rating agency discussions will be more relevant for our industry.

Or that's something that possibly you guys could just go back to over time. Well, certainly we look forward to hearing about, certainly, the work that can be done on the balance sheet. Thanks, guys.

(Operator Instructions) Mark DeVries, Barclays.

Sorry if you covered this already, but could you give us a rough sense of what the impact may be on the estimated $300 million shortfall if you see some modifications to the areas in PMIERs where you are more optimistic around premiums and seasoning?

Mark, this Mike. Since we don't really have a feel, our sense is that there's going to be some softening of the rules. But exactly how and what channel and what element, we don't know exactly what it would be. So it's hard to say. We could speculate into some hypotheticals, but I don't know if that's more just to do. Clearly, the inclusion of premium only looked at our proxies, last year we broke out -- last year were 2/3 of the $600 million was from the 2008 prior and $300 million plus was from the 2009 forward. So if they include forward premium, that's at minimum that $300 million, that would be one year that it [would] do well.

But again, there are so many moving parts. And we mentioned the three big ones, but there's also a lot of technical things that are included -- premium receivable, investment income receivable, things that could be counted as well that currently aren't. So it's difficult to say.

Any movement, Mark, is very positive for us. So rather than try and quantify it here, soon enough we will be able to do that for you.

Okay. That's helpful. Next question. Do you have a sense for what percentage of the new notices that are coming now are still from the older books of, let's say, 2006 to 2009?

Well, 96% of them are from the 2008 and prior. And I think, of that, 70% of them are from the 2005 to 2008 book.

Okay. And I guess you are not getting a lot of data points on the newer books. But do you have a sense for how the cure rates on the newer books are trending relative to your 15% blended rate right now?

Yes. I'd say they are in line. Again, it's not a big part of the inventory. So it's -- but I'd say that they are not an outlier from that perspective.

Okay. So in the past when you've had really good years with very low loss ratios, is that driven more just by the default rate than it is by cure rates? Or is it a combination of both?

Well, I think it's a combination of both -- having lower levels of new notices but also those new notices gearing out at a greater rate. As we've said before, in historical norms, out of all the new notices we get in, 90% of them will cure. 10% of them will ultimately go to claim. And then the level of those notices being depressed obviously helps from the curve perspective as well.

So that 90%/10% relationship that Tim mentioned in more normal times compares to the 85%/15% split now. So it doesn't sound like much, but it's a third reduction in incurreds just because the cure rates at 10% -- or the claim rates at 10% versus 15%.

Got it. That's helpful. Thank you.

And I'm not showing any further questions at this time. I'd like to turn the conference back over to management for closing remarks.

Okay. Well, thank you all for your interest in the Company. It was a good quarter for the Company just by the fact on this call we are talking about an old IRS transaction. So the fact that that's headlining things says a lot about what's going on behind the scenes running the Company. So thank you all for your interest, and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a good day.