The underpants on the default Michael 4 are on the texture. You will need to go to the Pose portion of your library and look for Michael 4 folder. There you will find "MAT Poses" which will change his texture from the default to the the nude.

If you are trying to do a nude render you will also have to purchase Michael 4 Morphs ++ because that is where you will find his genitals! They do not come with the free base figure.