MGIC Investment Corp (MTG) 2017 Q2 法說會逐字稿

Good morning. My name is Josephine, and I will be your conference operator today.

At this time, I would like to welcome everyone to the MGIC Investment Corporation Second Quarter 2017 Earnings Call. (Operator Instructions)

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

Thanks, Josephine. 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 second quarter of 2017 are CEO, Pat Sinks; Executive Vice President and CFO, Tim Mattke; and Executive Vice President of Risk Management, Steve Mackey.

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 which we think you will find valuable.

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 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 this morning.

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.

At this time, I'd like to turn the call over to Pat Sinks.

Thanks, Mike, and good morning. I'm pleased to report that we had another strong quarter and that we continue to build on the momentum of the first quarter. In a few minutes, Tim will cover the details of the financial results. But before he does, let me provide a few highlights.

In the quarter, we wrote $12.9 billion of new business, up 2.4% from the same period last year. The new business, combined with the sequentially higher annual persistency, resulted in a 5.5% increase in insurance in force. Since insurance in force is the driver of our revenues, this is a key metric that we focus on.

The growth of insurance in force reflects the expanding purchase mortgage market, our company's market share of approximately 18% and the hard work and dedication of my fellow coworkers to deliver stellar customer service. The 2009 and newer books now account for more than 74% of our risk in force and continue to generate a low level of losses.

The increasing size and quality of our insurance in force, the runoff of the older books and our strong financial performance position us well to provide credit enhancement and low down payment solutions to lenders, GSEs and borrowers.

During the quarter, we saw low level of refinanced transactions, accounting for just 9% of our new insurance written compared to 17% for both last quarter and the second quarter of 2016. Year-to-date through mid-July, refinanced applications accounted for just 11% of total applications compared to 17% from the same period last year.

Year-to-date purchase application activity through mid-July is 7% higher than the same period last year. This is a net positive for our company and our industry as our industry's market share as a percentage of total originations is 3.5x to 4x higher for purchased loans and refis.

With the current and expected level of mortgage rates, we expect a continued low level of refinance activity and that the annual persistency metric we report each quarter will continue to increase gradually in subsequent periods. Given the actual result to date and expected new business, we still expect to write approximately $48 billion of new business for the full year. This level of new business, combined with an expected increase in persistency, should result in insurance in force continuing to increase.

We continue to reposition our balance sheet to take advantage of future business opportunities. During the quarter, the 2017 senior notes matured, which eliminated approximately 11 million potentially dilutive shares. We repaid the credit facility, converted most of the outstanding 2020 senior notes to common stock and redeemed those that did not convert. These actions improved our leverage ratios and will decrease our interest expense in future periods.

With that, let me turn it over to Tim.

Thanks, Pat. In the quarter, we earned $118.6 million of net income or $0.31 per diluted share versus $109.2 million or $0.26 per diluted share for the same period last year.

To make year-over-year comparisons of financial results more meaningful, we disclosed adjusted net operating income, a non-GAAP measure. While there are only immaterial impacts in the quarter, a reconciliation of GAAP net income to adjusted not -- net operating income is included in the body of the press release.

The primary driver of the improvement in our financial performance was lower losses incurred. Losses incurred were $27.3 million versus $46.6 million for the same period last year due primarily to fewer new notices received and a lower claim rate on the new notices received compared to the same quarter last year.

Each quarter, we review the performance of the existing delinquent inventory to determine what, if any, changes should be made to the estimated claim rate and severity factors. As a result of this review, we updated our assumptions for previously received delinquent notices because the actual experiences outperformed our previous estimates. This resulted in a benefit of approximately $52 million to our primary loss reserves principally due to lower estimated claim rates.

In the second quarter, we received 10% fewer new notices versus the same period last year and reflecting a current economic environment in anticipated cures, we used a claim rate of approximately 11% on these new notices. While this rate is modestly higher than the first quarter due to the seasonal factors, it is lower than the 13% rate used in the same period last year.

The new delinquent activity from the larger, more recently written books remains quite low, reflecting their high credit quality. And new delinquent notices from the legacy book continue to decline at a steady pace. We expect that the legacy books will continue to be the primary source of new notice activity for the foreseeable future. During the quarter, the legacy books generated nearly 83% of the new delinquent notices received while accounting for just over 25% of the risk in force.

Reflecting the smaller delinquent inventory, the number of claims received in the quarter declined 13% from the same period last year. Net paid claims in the second quarter were $173 million. Included in that amount was $45 million that was associated with the loans that were removed from inventory through the agreement to terminate coverage that had been previously disclosed in our monthly operating statistics. Excluding this impact, primary paid claims were $126 million, down 18% from the same period last year.

The effect of average premium yield for the second quarter of 2017 was approximately 50 basis points, which was effectively flat from the first quarter level. As I have discussed in the past, for a variety of reasons, we expect that the effective premium yield will trend lower in future periods. However, the exact amount and timing is difficult to predict.

At the end of the second quarter, MGIC's Available Assets for PMIERs purposes totaled approximately $4.7 billion, resulting in an $800 million excess over the required assets. MGIC's statutory capital is $1.8 billion in excess of the state requirement.

Reflecting the profitability and quality of the new books of business as well as the improved performance and runoff of the legacy books, the excess over the PMIERs required assets continues to grow. In addition to writing new business and exploring new opportunities as they arise, we will try to manage the amount of excess by continually reviewing our use of reinsurance as well as continuing to seek and pay dividends out of the writing company.

Regarding MGIC's ability to pay quarterly dividends, we've previously disclosed that the Wisconsin insurance regulator approved a $30 million dividend that was paid to the holding company in the second quarter. We continue to be optimistic that these quarterly dividends will continue and are planning to ask for and receive a higher dividend in the third quarter. We are hopeful that the dividends can grow in the future, especially if the difference between Available Assets and required assets under PMIERs grows as we expect. As a reminder, OCI authorization is sought before MGIC pays any dividend.

In March, we issued a irrevocable notice of redemption of our 2% convertible senior notes due in 2020. As expected in April, virtually all of the holders elected to convert their notes to shares of our common stock. The conversion had no material impact to diluted earnings per share during the quarter as they have been previously included in that calculation.

We also repaid the $150 million that was previously drawn on the line of credit as those resources were not needed to settle the redemption. These transactions, combined with the retirement of the 5% senior notes, resulted in our debt to total capital ratio declining to approximately 22% at the end of the second quarter from approximately 30% at the end of the second quarter of 2016.

At quarter end, our consolidated cash and investments totaled $4.8 billion, including $149 million of cash and investments at the holding company. The investment portfolio had a mix of 68% taxable and 32% tax-exempt securities, a pretax yield of 2.7% and a duration of 4.6 years. The holding company has resources for approximately 2.5 years of ongoing debt service.

As of June 30, the holding company's annual debt service on the remaining outstanding debt is approximately $60 million. This includes approximately $12 million that the holding company pays MGIC, which owns $133 million of the 9% junior subordinated debt.

When we analyze various options to deploy our capital resources, we need to take into account that the holding company's primary source of capital is the writing company. So while capital is being created at the writing company level, its ability to pay dividends to the holding company is subject to OCI review and approval. We also consider the resulting leverage ratio, the ability to create our -- continue our positive ratings trajectory and the debt serviceability of the holding company.

With that, let me turn it back to Pat.

Thanks, Tim. Before moving to questions, let me give a quick update on the regulatory and political fronts. The review and updating of state capital standards by the NAIC continues to move forward, albeit slowly. At this time, we do not expect the revised state capital standards to be more restrictive than the financial requirements of the PMIERs.

Regarding PMIERs, the GSEs have committed to us that they would provide at least 180 days written notice prior to the effective date of the new requirements. Recently, they informed us that they currently anticipate that new PMIER financial requirements would not become effective until the fourth quarter of 2018.

In regards to housing finance reform, we remain optimistic but it continues to be very difficult to gauge what actions may be taken and the timing of any such actions. But the message that private capital can play a greater role in housing policy is being heard and is a positive for MGIC and our industry.

As an individual company and through various trade associations, including USMI, we are actively engaged in Washington, hoping to shape a greater role for private mortgage insurance. We are encouraged that the discussions about housing reform are now beginning to be more inclusive about the role of each of the GSEs, FHA and private capital versus treating them as separate topics.

Regarding the FHA specifically, a new director has not yet been named. But based on our discussions with various parties in the administration, we do not expect FHA to cut its premium rates in the foreseeable future.

In closing, we continue to build off of the great start we had in the first quarter. Our insurance in force continued to grow, annual persistency is increasing, new delinquent notices declined as the newer books of business continue to generate low levels of new delinquent notices and the legacy portfolio continues to run off. Further, the anticipated claim rate on existing delinquencies declined. We maintained our traditionally low expense ratio and the holding company received a $30 million dividend from MGIC.

I'm very excited and confident about the opportunities MGIC has to continue to serve the housing market. And as I have said in previous quarters, I firmly believe that there is a greater role for us to play in providing increased access to credit for consumers and reducing GSE credit risk while generating good returns for shareholders. And we are committed to pursuing those opportunities.

With that, operator, let's take questions.

(Operator Instructions) Your first question comes from Bose George with KBW.

Just first on PMIERs 2.0. You guys noted you have $800 million of excess capital under PMIERs. Just longer term, once you have clarity on PMIERs 2.0, what do you think is a good run rate for kind of the capital cushion for PMIERs?

Well, Bose, this is Tim. We talked that we'd like to be in the 10% to 15% right now. But I think that includes some of our -- not knowing what PMIERs 2.0 would be, so I think it's safe to say that, in general, we think it could be lower than that. But I think it will depend upon the conditions that exist at the time. And once we see sort of what PMIERs 2.0 looks like, we'll have a -- probably be able to have a better response as to what we think the right range would be at that point.

Okay. And then you noted that you've heard from FHFA or GSE that it won't be effective until the end of 2018. Is there any other indication of how PMIERs 2.0 might be different from 1.0?

Hey, Bose, this is Mike. I just wanted to clarify. It's not -- it's the fourth quarter of '18, so not necessarily year-end '18, just to be technical on that. But to answer your question directly, no, we haven't really heard any directional comments from the GSEs about what are they -- or the FHFA about how -- what they're thinking about as far as changing the tables, what factors and those types of things.

Okay, great. Just one more on the premium. Your average premium on NIW went up again this quarter. I'm just curious what's driving the improvement there. Is there a sort of seasonality, purchase versus refi mix? Or kind of anything else that's moving that number?

This is Tim. I think it's mostly mix. I don't think there's really seasonality per se, but a slight increase in [97%] LTV business and marginally lower FICO scores probably contribute to those numbers.

Your next question comes from Jack Micenko with SIG.

What was the quarterly persistency rate? I know you guys report the portfolio level, but a quarterly number for us?

The quarterly -- Jack, this is Mike. (inaudible) Just a touch over 80% as refis picked up just a little bit and the cancellation rate, I should say, picked up a little bit. But again, as they did last quarter, I don't want -- wouldn't want anybody to overemphasize the quarterly trend, the annual persistency keeps ticking up.

Okay, that's fair. And then, Tim, as we kind of see some proposal out accounting for credit losses and realizing more of those sort of over-the-life losses upfront. I'm curious if you looked at that and how you think about it, I mean, it's certainly going to be something the banks have to deal with. It does apply to loans and you're not a lender, but it does carve out financial instruments and debt investments, too. So do you guys have any thoughts around whether that's going to apply to MI policies? Or any forward thought there?

Yes, Jack, that's a good question. I think our current thinking right now is that it does not apply to MI from an insurance accounting standpoint when you think about sort of the loss reserving process, but that's something that we obviously keep a close eye on and make sure we understand what the guidance is if there's any authoritative guidance that would come out that would scope in the MI industry.

Okay. And just real quick, was there any tie at all between the larger rescissions and the development -- the positive development you saw in the quarter?

[Just] to clarify the larger, you said, rescissions?

Yes.

Let me try it again. You said about the termination of the coverage? Or...

Just the rescission count was higher. I'm wondering if that had anything to do with the -- I know you said it was claim rate change, but (inaudible) anything like that. Okay.

Yes, I think from our reaction, no, it didn't have a correlation.

Your next question comes from Phil Stefano with Deutsche Bank.

A quick point of clarification. So the PMIERs 2.0 will be a fourth quarter effective. Does that imply second quarter will get the word -- the draft wording and such in thinking about the 180-day lag?

Well, based on the -- this is Mike, Phil. So they told us they'd give us 180 days written notice before they're effective and that in the time period in the fourth quarter so it could be as early as the second quarter. It could -- depending on if it's later in the fourth quarter, it could be later -- it could roll later into the year. But that's the best information that we have at this time.

Got it, got it. Okay. And thinking about the expenses and the expense ratio, so if you look at expenses excluding the ceding commission, it feels like it's been growing mid-single digits. To what extent -- is that a right way to think about expense growth in light of the potential for earned premium growth pressure that you've been guiding to with lower premium yields? How can I think about this translating to the expense ratio? I guess, ultimately what I'm trying to get to is how can I think about the scalability of the business and what that implies moving forward?

Yes, I think -- Phil, this is Tim. I think from scalability, I think we feel very good about it. That being said, I think I would say if you're talking about the expense ratio, the run rate we had this quarter was pretty consistent with what we've seen over the last couple of quarters. And it's probably a pretty good range to think about that over the rest of the year. That being said, if you're looking just at the growth expenses, I think we've talked at the end of last year coming into this year probably a gross basis, we're probably going to be up somewhere just less than 5% and I think those things sort of all sort of come together. So I -- we've got a little bit more from an expense standpoint on a gross basis, but we don't think that, that means that the expense ratios get out of whack with where they've been over the last year or so.

Okay. Is that a feel for what the "right" expense ratio is for the long term? I guess, how is -- how do you think about being comfortable? You're both operating efficiently, but also making investments for the future. And what are the conversations internally that happen there around that balance?

Yes, I think we've always, in general, talked about, from a pricing standpoint, that we think about a 20% expense ratio that seems to be sort of the standard measure in the industry. I think we've always taken a great pride in that we've been able to operate underneath that for the most part. So I think if we trend higher towards that 20%, we ask ourself questions. But at the same time, we feel like we continuously invest in our IT infrastructure and don't have any sort of significant [one-time] items that are delayed on that. And so I think we feel pretty good about -- with where expenses are right now.

Your next question comes from Geoffrey Dunn with Dowling & Partners.

Tim, just first, can you quantify the refunded premiums in the quarter, please?

The refunded premiums? From an accelerated premium amount, I don't know if that's what you're talking about, Jeff...

Yes, exactly.

As far as the singles go. If you're talking about accelerated singles in the quarter, it was about $7.5 million. That's compared to probably about $5 million in Q1, but down from what we saw in the second half of last year.

Right. And then with PMIERs, obviously not a surprise, I guess, that it didn't hit the deadline. But what do you guys read into the fact that it slid past that kind of June 30 implied 2-year maximum review deadline? And as you think about what could come at you, is there -- any posturing from the GSEs that suggests that they wouldn't just kind of arbitrarily tighten this up on you?

This is Tim. I think it's tough to answer. I think to what they might do, I think it'd be all speculation from our part and we don't have any knowledge about that. As far as what they could do based upon us and others having an access, tough to know. I mean, I take to comfort hoping that they will do what they think is the appropriate thing for the amount of capital that the industry needs to hold. So I don't know if the delay -- to meet the delay is just a timing issue as opposed to anything else.

Your next question comes from Douglas Harter with Crédit Suisse.

As the dividends you're getting from the writing company up to the HoldCo start to exceed your cash needs there, can you talk about what the potential uses are and how you're prioritizing those?

Yes, I think we're very happy that the dividends are increasing, and they're outpacing sort of the HoldCo needs from an interest service standpoint right now. By the same token, I think we've talked in the past that we'd like to have somewhere around 2 to 3 years of interest coverage there. And right now, we're not up to 3 years. So we don't view us as having a lot of excess firepower up there at this point. I'd say from a debt leverage perspective, we're very happy that we've gotten into the low 20s, but I don't think we're looking to take on additional leverage at this time to do anything else from a capital perspective. So I think it's something that hopefully we continue to get the dividend to increase over time. I think it'll be something that we'll obviously be taking even closer looks at. But right now with where we are, we feel pretty comfortable with the cash at the holding company to cover sort of the interest carry that's there right now.

And I guess it looks like obviously, we're dealing with rounded numbers, but the PMIERs excess kind of went from $700-ish million to $800-ish million. I guess any thoughts as to how quickly the dividend could increase such that -- that, that excess cushion stops growing?

That's tough to speculate exactly how much, I think, as far as how much the [dividend] will increase. But I do think there is hopefully a correlation and we alluded to that as the excess continues to grow the PMIERs requirement, so we hope that, that bolsters the case for being able to get dividends out. But the relationship exactly, I think that's difficult to sort of forecast.

Your next question comes from Mark DeVries with Barclays.

First, I just wanted to clarify your comments around your cash position. Sounds like, Tim, you said you don't really view other companies having much excess at this point. But if I got the numbers right, I think you indicated current cash investments are around [$150 million], but debt service requirements annually are [$60 million]. And your dividends up from the writing company are annualized for almost 2x that debt service. So what am I missing? Why aren't you already in an excess cash position where you are now?

I think you've gotten -- the numbers are right. We -- $149 million of cash at the HoldCo right now, $60 million a year as far as the interest coverage goes. So we really look at that compared to the $149 million, so about 2.5 years of interest coverage there because we have to request approval from the state right now. I think that's how we sort of look at it as far as the dividends go. Even though we, again, from a looking forward perspective, we're very hopeful that we'll continue to get the dividends out. But from -- coming out where we come from, I think our view is comparing that cash that's sitting there right now compared to the interest carry is how we're looking at it versus the additional sort of net increase in the dividend on the [comp] potentially.

Okay, got it. I think you indicated you're hoping to get more -- an increase in the dividend 3Q. You didn't indicate how much. I don't think -- is that something you can comment on?

We did not indicate and it's not something that we're going to comment on.

Okay, fair enough. And then finally, I was hoping you could help us think through when we might start to see some revenue growth here because we've -- you've got insurance in force accelerating here, I think, north of 5%. At least on NIW, there are positive trends in terms of the average premium with the mix of higher LTV business increasing, obviously partially offset by just the impact of the used reinsurance. Interested in your thoughts on the kind of the trajectory going forward on revenue growth.

Yes, this is Tim again. I think in the quarter, again, the average premium yield was pretty flat quarter-over-quarter, but we do still view that as a headwind from a revenue standpoint. So we still expect when you look over the longer term, that the average premium yield will continue to trend down like it has over the last couple of years. And so right now, we're expecting sort of mid-single digits increase in the in force. So that helps keep the premium relatively steady right now. But as far as growth in the short term, I think with the average premium yield continuing to decline, we don't see that in the short term. [Absent] changes in persistency, additional volume over what we expect, et cetera.

Okay. And when would you expect that premium pressure to abate?

The timing of that's really difficult to know, especially as you look at this most recent quarter and you do see that we are writing a little bit higher average premium rate on new business. So the mix of the business, it plays a lot in that. So to try to figure out exactly when that might sort of stabilize or turn, I think is very difficult.

Your next question comes from Randy Binner with FBR.

I have one more on 2.0. The 180-day written notice period, is that -- does that give you the opportunity to come back -- go back to the GSEs with alternatives to their proposal? Or is that basically just 180 days of warning that they have issued a final rule?

Yes, Randy, this is Mike. No, we expect that there will be some back-and-forth before that -- the 180 days, think of that as when it'd be final. So the final update would be made and then we will have 180 days -- the industry would have 180 days before they're effective. But we would expect (inaudible) we'll have some back-and-forth. I would imagine we'll see them before then. So it's not just -- that it's going to show up in the mail and they're effective. There will be some conversations about it.

And you all mentioned that tables and factors could be changed, which I think goes without saying. But is there -- I mean, do you expect any haircuts around the use of reinsurance or other admitted assets? And is there any kind of sense you have of where to land? And the follow-up to this is just going to be should we expect you to have to carry this significant PMIERs buffer until I guess, mid-'18, so a year?

Yes, Randy, this is Mike again. We -- there's very little visibility into what changes. It could be including the topics that you talked about. So we're, I'll say, like the rest of the market, waiting to see what the GSEs and the FHFA will propose as far as changes to the factors. And just to clarify, too, the GSEs and FHFA over the last year have made some subtle changes relative to the different requirements [in QC and things --] clarifying things but not to the financial factors. So that's really where the 180 days -- they could change other subtle things along the way, but the 180-day window is really about the financial tables.

I think the other thing I'd say, too, is the buffer is one, a function of how much we want to hold. But obviously we're above that and the other part of it is how much we can dividend out based upon a regulator. So that's the other constraint that's apart from the PMIERs that comes into play as far as how much the access for holding in MGIC.

Right, but that's a less binding constraint, I guess?

Less binding constraint, but in general, that's part of the reason why we're holding more than we think we need to hold versus PMIERs is how much dividend capacity does the state regulator view. Because right now, we do have to seek their approval. So even though 25:1 is the requirement, that isn't the requirement as far as dividend capacity goes.

And then just jumping over to the reserve activity. So there's 2 quarters in a row of reserve releases there. Is there a -- kind of a timing or a process that can -- we would expect to continue or not continue? Meaning what is your methodology around these reserve releases? And how should we think about the likelihood of those happening on a quarterly basis going forward?

Well, we go through the process each quarter of updating our assumptions over the delinquent inventory and come up with the new estimate. And really, the reserve releases, we refer to it as more of an output of that as opposed to decision-making on that. So each quarter, we go through the process reestimate and that gives us basically an answer as to whether we're over-reserved or under-reserved to prior period. Based upon how things went over the last couple of quarters, it's been favorable development. But to predict what will happen in the future is obviously difficult.

Your next question comes from Mihir Bhatia with Bank of America.

Just had one -- just one quick question. Just wanted to talk about market share a little bit. I think you mentioned in your prepared remarks that you all estimated an 18% market share for the quarter. I think that's consistent with last quarter and really the last few quarters. And I guess my question is just, the -- I think our expectation was that your market share would start -- would increase a little bit potentially, given the Arch-UGC deal and some of just the other noise in the marketplace. Are you seeing any impacts of that? Or is that not yet coming through and maybe later in the year you'd start seeing that?

This is Pat. We did see our market share grow from the fourth quarter to the first quarter. I think it was in the high 17s to low 18s. We don't know yet what market share is in the second quarter. We probably won't know that for a month. But our instincts tell us we're still in that 18% range, so I can't say with any certainty if we've been able to grow it to any great degree in the second quarter. We feel good about where we're at. We're as much focused on returns on capital, and we don't want to grow market share for the sake of growing. And now specific to Arch and the transaction, they reported, I think, over the course of last couple of quarters even prior to the acquisition last year and into the first quarter this year, they had lost, I think, about 1 point of share. And I think -- my thought is they'll continue to lose some. I mean, they said that publicly. But that happens over a period of time. I mean in that regard, we're dependent upon the lenders looking at their MI relationships and deciding to reallocate and there's no set pattern to that. So I think any share that we may pick up will be very gradual.

Got it. And just one other question really quickly on your premium yield. It was a nice bump up this quarter, I think, both on monthly then singles even more so. And I was just wondering, is that just mix shift from the types of policies they're writing or was there also some other things going on there?

(inaudible) I think that's mostly just mix shift, a little bit maybe higher LTV and maybe marginally lower FICOs creating that.

Got it. And any expectations from -- I think there's been a little bit of loosening of the credit box from Fannie and from the GSEs a little bit, where I think the DTI range and stuff increased. Do you all expect that to have any kind of material impact on your NIW expectations for the year? Or...

No, we're not -- this is Steve. No, we're not expecting that to have a material impact.

Your next question comes from Mackenzie Aron with Zelman & Associates.

Just 2 quick ones on the model. Was there any change in the IBNR? And then also what should we be looking for, for the tax rate for the full year?

Yes, Mackenzie, it's Tim. IBNR, no change. Tax rate for the full year, I think we're in that range now. Part of it depends upon the mix of the investment income we get versus the underwriting income. So I think it was -- it can trend a little bit higher if we have reserve releases, for example, that create more underwriting income. But in that sort of [33% -- 32%, 33%, 34%] sort of area sort of I think where you should expect us to be [where we've been].

Okay, great. And then Pat, I guess, just one last one on -- maybe any update on your conversations with the GSEs around potentially continuing to do the pilot programs with the front-end risk transfers. Do you think that's something that we can look for later this year?

Well, they are continuing to pursue different types of structures. So we have ongoing dialogues with them. We stuck our toe in the water last year a little bit. But it all comes down to returns on capital, how much capital we need to hold, different things of that nature. So I expect the discussions to continue, but I can't point to anything definitive that will find its way into an actual transaction.

And there are no further questions at this time.

Okay. Well, this is Pat, and I want to thank everybody for your interest in our company and joining us this morning, and have a great day.

That does conclude today's conference call. You may now disconnect your lines.